Key Takeaways
- The ban prohibits local regulators from issuing any licenses allowing firms to provide virtual asset services as a commercial business.
- The Central Bank of Kuwait, the Ministry of Commerce and Industry, The Insurance Regulatory Unit, Capital Markets Authority have issued circulars banning crypto in the Arab Nation.
Kuwait’s financial landscape underwent a significant transformation on July 18, 2023, as the Capital Markets Authority (CMA), the main financial regulator in the country, issued a circular addressing the supervision and issuance of virtual assets. The circular confirmed Kuwait’s firm commitment to an “absolute prohibition” on major use cases and operations involving cryptocurrencies, including payments, investments, and mining.
In a bold move, the CMA also barred local regulators from granting licenses to firms seeking to provide virtual asset services as a commercial business. However, the circular explicitly excluded securities and other financial instruments regulated by the Central Bank of Kuwait and the CMA from these prohibitions.
The primary focus of the circulars was to protect consumers by alerting them to the risks associated with dealing in virtual assets. The CMA emphasized that cryptocurrencies, in particular, do not carry any legal status and are not backed or issued by any government entity. This lack of support renders cryptocurrencies susceptible to speculative price swings, leading to sharp declines that could adversely affect investors.
The joint circulars issued by Kuwait’s supervisory authorities, including the Central Bank of Kuwait, the Capital Markets Authority, the Ministry of Commerce and Industry, and the Insurance Regulatory Unit, align with the recommendations provided by the Financial Action Task Force (FATF). These recommendations, outlined in Recommendation No. 15, aim to combat money laundering and terrorism financing.
Notably, the circulars explicitly ban the use of virtual assets as a tool or means of payment, prohibiting transactions involving cryptocurrencies for payment purposes. They also extend this restriction to cover all cryptocurrency mining activities within the country. By imposing such comprehensive measures, Kuwaiti authorities seek to mitigate the risks and negative consequences associated with investing or dealing in virtual assets.
One of the key aspects of the circulars is their prohibition of virtual assets being used as a means of investment. The authorities underscore the inherent risks involved in dealing with virtual assets, emphasizing the lack of legal status and government backing as significant concerns.
Crucially, the regulatory authorities clarified that no licenses had been issued to provide virtual asset services as a business within Kuwait, and they strictly oppose granting licenses for such services to individuals or entities. The decision aligns with Kuwait’s cautious approach to safeguarding its financial system and the interests of its citizens from potential risks related to virtual assets.
