Written by Hazel J. Greene, Senior Analyst

Kuwait’s Capital Markets Authority (CMA) has recently taken decisive action in regulating virtual assets within the country. In collaboration with other regulatory bodies, the CMA has released a circular outlining strict prohibitions on significant activities involving cryptocurrencies. While this move aims to protect investors and safeguard against potential risks, it does not apply to securities and other financial instruments regulated by the Central Bank of Kuwait and the CMA.

In a united effort, Kuwait’s supervisory bodies, including the Central Bank of Kuwait, the Ministry of Commerce and Industry, and the Insurance Regulatory Unit, have jointly issued circulars as part of an inter-departmental crypto ban. These directives accentuate the risks associated with unregulated virtual assets and cite the absence of government backing as a key concern. By enforcing these prohibitions, authorities aim to shield citizens from the volatility and speculation-driven nature of cryptocurrencies.

The circular from the CMA unequivocally prohibits significant applications and activities involving cryptocurrencies, including payments, investments, and mining. It asserts that virtual assets should not be used as investment vehicles. However, it is important to note that these restrictions do not extend to securities and other regulated financial instruments under the purview of the Central Bank of Kuwait and the CMA.

The CMA emphasizes the inherent risks associated with dealing with virtual assets due to their unregulated status. These assets are not linked to any asset or issuer, making them susceptible to drastic price fluctuations. The circular serves as a reminder to customers to exercise caution and understand the risks linked to virtual assets.

In line with Kuwait’s commitment to combat money laundering and financing of terrorism, violating the prohibitions outlined in the circular will result in penalties. These penalties are specified in Article 15 of Law No. 106 of 2013, reflecting the seriousness with which Kuwait treats anti-money laundering laws.

While countries are obliged to implement measures to prevent money laundering and comply with the Financial Action Task Force’s (FATF) travel rule, which requires crypto firms to collect and share transaction data exceeding a specific threshold, the FATF itself has not mandated countries to ban cryptocurrencies. Kuwait’s recent circulars align with the recommendations of the National Committee for Combating Money Laundering and Financing of Terrorism.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.