- Kuwait has prohibited all citizens from participating in the sale, purchase, or investment of digital assets not issued by companies regulated under the CMA.
- This ban aligns with the FATF’s Recommendation 15 to bolster Kuwait AML and CTF initiatives.
- Engaging in activities around digital assets will carry significant consequences for Kuwaitis.
To bolster its anti-money laundering (AML) and counter-terrorist financing (CTF), Kuwait has implemented strict measures against cryptocurrency activities within the country.
The Central Markets Authority (CMA) issued a release on July 18, officially declaring all cryptocurrency-related actions, such as crypto investment, payments, and mining, illegal.
FATF Recommendations and Virtual Assets
Kuwait’s decision aligns with Recommendation 15 of the Financial Action Task Force (FATF), which states that:
“Countries and financial institutions should identify and assess the money laundering or terrorist financing risks that may arise in relation to (a) the development of new products and new business practices, including new delivery mechanisms, and (b) the use of new or developing technologies for both new and pre-existing products.
To manage and mitigate the risks emerging from virtual assets, countries should ensure that virtual asset service providers are regulated for AML/CFT purposes, and licensed or registered and subject to effective systems for monitoring and ensuring compliance with the relevant measures called for in the FATF Recommendations.”
The FATF is an intergovernmental organization established in 1989 to combat money laundering and terrorist financing globally. Its primary objective is to develop and promote policies and standards to prevent and combat these illicit financial activities.
The FATF’s recommendations cover various areas related to AML and CFT, including customer due diligence, suspicious transaction reporting, international cooperation, and the regulation of virtual assets and cryptocurrencies.
While the FATF doesn’t mandate cryptocurrency bans, Recommendation 15 emphasizes treating virtual assets as “property,” “returns,” “funds,” or “other corresponding value” under anti-money laundering regulations.
Severe Penalties for Violators
Kuwait’s anti-money laundering and terrorist financing laws prescribe harsh penalties for those found in violation. Additionally, the CMA prohibits local regulators from issuing licenses to individuals or businesses seeking to offer cryptocurrency services as a commercial enterprise.
However, securities regulated by the Central Bank of Kuwait and financial instruments regulated by the CMA are exempt from these restrictions.
The CMA has also taken the initiative to educate clients about cryptocurrency risks. It emphasizes that virtual assets lack legal status and are not supported or issued by any government.
Moreover, they are not linked to any tangible asset or issuer, making their prices highly speculative and subject to significant fluctuations.
Kuwait Joins Global Trend
By imposing a ban on cryptocurrency activities, Kuwait joins other nations like Thailand, Indonesia, and Turkey in restricting cryptocurrency payments. This move underscores the growing global concern regarding the regulation and oversight of the cryptocurrency industry.
As Kuwait takes proactive steps to safeguard its financial system, individuals and businesses within the country are urged to strictly adhere to the regulations and refrain from engaging in cryptocurrency-related activities.
