Kuwait Authorities Crackdown on Crypto and Virtual Asset Transactions

Jimmy Aki
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The Capital Markets Authority (CMA) of Kuwait has formally affirmed its decision to ban all cryptocurrency activities in the country.

Kuwait Commits to Crypto Prohibition in the Country

Kuwait has announced a complete ban on all cryptocurrency and virtual asset transactions. 

This was revealed on July 18th, when the CMA, Kuwait’s main financial regulator, issued a circular regarding the regulation and issuance of virtual assets in the country.

In the circular, the CMA confirmed its stance against using virtual assets as a payment method or considering them a decentralized currency in Kuwait. 

In view of this new development, there is a strict prohibition of people from engaging in transactions that involve virtual currencies as a means of payment.

The circular also prohibits dealing with virtual assets as an investment opportunity. As a result, any services related to virtual asset investment should not be offered to clients.

The CMA has forbidden local regulators from granting licenses to individuals or businesses to provide virtual asset services within Kuwait.

However, it is important to note that this prohibition does not apply to securities regulated by the Central Bank of Kuwait or other financial instruments held by the CMA.

The financial regulator further stressed the need for people to exercise caution and be fully aware of the risks associated with virtual assets, particularly cryptocurrencies. 

The CMA clarified that cryptocurrencies do not possess legal status and are not issued or backed by the authority of many countries.

To that effect, people must be vigilant of the risks associated with virtual assets transactions outside Kuwait, especially when dealing with cryptocurrencies. 

According to the CMA, the prices of such assets are highly speculative and prone to significant declines due to their lack of legal status and issuer support.

It warned that any violations of its provisions may be subject to measures or penalties stated in Article 15 of Law No. 106 of 2013. 

This is a section of the law that pertains to combating money laundering and terrorism financing. 

Additionally, relevant supervisory authorities may impose further penalties for non-compliance.

Kuwait’s Focus on Money Laundering

The CMA announced that Kuwait’s latest regulations align with the country’s efforts to combat money laundering and terrorism financing. 

The circular was issued to strengthen these efforts. It was also based on a study conducted by the National Committee for Combating Money Laundering and Financing of Terrorism.

The study focused on implementing Recommendation (15) from the Financial Action Task Force (FATF) concerning virtual assets. They are digital representations of value for trading, digital transfers, payments, or investments.

According to Recommendation (15), virtual assets should be regarded as “property,” “returns,” “money,” “money or other assets,” or “other corresponding value.” 

It is essential to note that virtual assets do not include digital representations of paper currencies, securities, or other financial investments addressed elsewhere in the FATF’s recommendations.

UAE Rises as a Pro-Bitcoin Mining Region

While Kuwait currently focuses on eliminating crypto transactions, another Middle Eastern country, the United Arab Emirates (UAE), aims to warmly welcome digital assets.

The UAE is steadily establishing itself as a preferred destination for Bitcoin mining in the Middle East. 

With more than 30 free trade zones and a growing contribution to the global Bitcoin mining hash rate, the UAE has emerged as a crypto-friendly country.

In May 2023, Marathon Digital, a Bitcoin miner, launched its mining venture by forming a partnership with Zero Two – the digital asset division of Abu Dhabi’s sovereign wealth fund.

They set up two mining sites in Abu Dhabi, boasting a combined capacity of 250 megawatts (MW).

Abu Dhabi’s energy efficiency and its central position in the country’s trade landscape have become a focal point for various crypto-mining activities in the UAE.

Data from the Hashrate Index indicates that the UAE’s total Bitcoin mining capacity likely stands at around 400 MW. This is equivalent to approximately 4% of the global Bitcoin hash rate.

Although countries like the United States, China, Russia, and Kazakhstan currently dominate the list of top countries contributing to Bitcoin’s global hash rate, the UAE may gradually ascend the rankings. 

This is due to its abundant resources and growing mining capabilities.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.