The ban crypto transactions in Kuwait is reportedly part of a broader regulatory initiative that involves multiple supervisory authorities, including the Ministry of Commerce and Industry, the Central Bank of Kuwait, and the Insurance Regulatory Unit.
Kuwait, a country in West Asia, has taken a stringent step in its regulatory stance on cryptocurrencies by imposing a comprehensive ban on all transactions involving crypto and other digital assets in the nation. The country’s financial regulator, the Capital Markets Authority (CMA) of Kuwait, released a circular on July 18, enforcing the absolute prohibition on major activities related to virtual assets, including Bitcoin (BTC), following in the footsteps of other nations such as Pakistan, Argentina and China which have already implemented similar restrictions on virtual assets in their various jurisdictions.
The ban covers crucial aspects of the crypto ecosystem, such as payments, trading, making investments in crypto, and engaging in mining operations. The move aims to address the potential risks associated with virtual assets and to safeguard the interests of consumers and investors.
CMA Claims Cryptocurrencies Lack Legal Status
While the ban prohibits crypto traders in the country from engaging in any digital assets-related activities, the new rule does not extend to traditional financial products in the country. According to the circular, the restriction does not apply to securities and other financial instruments regulated by the Central Bank of Kuwait and the CMA.
In its circular, the CMA cited the lack of legal status for cryptocurrencies as part of the reasons for the ban, emphasizing that digital assets are not issued or supported by any central authority.
In addition to the prohibition, the authorities have warned the public about the potential risks involved in engaging with digital assets, noting that prices or values of these assets are often driven by speculative trading, making them highly volatile and susceptible to sharp price fluctuations.
“It is not linked to any asset or issuer, and the price of these assets are always driven by speculation that exposes them to a sharp decline,” said CMA in the circular.
Crackdown on Money Laundering and Terrorist Financing
The financial authorities said in the circular that the recent regulatory changes align with the country’s dedication to combating money laundering and illicit activities related to cryptocurrencies within the nation. In line with its commitment to tackling money laundering and terrorist financing, the regulator emphasized that any violations of the country’s Anti-Money Laundering (AML) laws may result in penalties under Law No. 106 of 2013. These measures reinforce Kuwait’s efforts to maintain financial integrity and security.
The CMA also pointed to a study in the circular conducted by the National Committee for Combating Money Laundering and Financing of Terrorism regarding the commitment to implementing the Financial Action Task Force’s (FATF) Recommendation (15).
For clarity, the FATF Recommendation 15 is a regulatory framework that requires crypto exchanges and other virtual asset service providers (VASP) in the country to implement AML rules for money laundering and countering the financing of terrorism.
Meanwhile, the ban on Bitcoin and other crypto transactions in Kuwait is reportedly part of a broader regulatory initiative that involves multiple supervisory authorities, including the Ministry of Commerce and Industry, the Central Bank of Kuwait, and the Insurance Regulatory Unit. This coordinated effort ensures a consistent and unified approach to address the challenges posed by the rapidly growing cryptocurrency market.