- Kuwait’s CMA has banned major cryptocurrency operations like payments, investments, and mining
- Local regulators are barred from licensing virtual asset services as a commercial business
- The ban aligns with Kuwait’s anti-money laundering efforts, following the Financial Action Task Force’s recommendation
The State of Kuwait has become the latest country to ban virtually all cryptocurrency transactions. The Capital Markets Authority (CMA), the country’s main financial regulator, issued a circular on July 18, outlining strict regulations on virtual assets within the country.
The circular confirmed an “absolute prohibition” on major use cases and operations involving cryptocurrencies. This includes payments, investments, and mining. Additionally, local regulators are forbidden from granting licenses to firms that offer virtual asset services as a commercial business. However, it is important to note that this ban does not extend to securities and other financial instruments regulated by the Central Bank of Kuwait and the CMA.
In light of these new regulations, the CMA emphasized the need for customers to be cautious. They asked them to be fully aware of the associated risks when dealing with virtual assets. The regulator specifically pointed out that cryptocurrencies lack legal status. Furthermore, it stated they are not issued or supported by any entity. As a result, their prices are often driven solely by speculation. This makes them susceptible to significant fluctuations and sharp declines.
The circular also highlighted the potential penalties for violating Kuwait’s Anti-Money Laundering laws. The laws are outlined in Article 15 of Law No. 106 of 2013. The move to regulate cryptocurrencies aligns with Kuwait’s efforts to combat money laundering and terrorist financing. This was recommended by the Financial Action Task Force’s Recommendation 15.
Reports indicate that the CMA’s restrictions on cryptocurrencies are part of a broader inter-departmental crypto ban. The ban is reportedly involving various supervisory authorities in Kuwait. Moreover, similar circulars have been issued by the Central Bank of Kuwait, the Ministry of Commerce and Industry, and the Insurance Regulatory Unit. They collectively demonstrate the country’s comprehensive approach to controlling the use of virtual assets.
By imposing a comprehensive ban on most cryptocurrency-related activities, Kuwait aims to maintain financial stability and protect its citizens from potential risks associated with these highly volatile assets. The regulations not only reflect the country’s commitment to addressing money laundering and terrorism financing concerns but also serve as a proactive measure to safeguard its financial system from potential disruptions.
It remains to be seen how these stringent regulations will impact the cryptocurrency market in Kuwait and whether other jurisdictions will follow suit with similar prohibitions. As the global landscape surrounding virtual assets continues to evolve, regulatory bodies worldwide are closely monitoring developments and taking measures to strike a balance between innovation and investor protection. The effectiveness of Kuwait’s approach will be closely observed by the international community as the debate on cryptocurrency regulations continues.