Kuwait, the Gulf state, has issued an absolute ban on all activities involving cryptocurrencies, such as Bitcoin, Ethereum, and Dogecoin, through several regulators.
The announcement, made by Kuwait’s principal financial regulator, the Capital Markets Authority (CMA), on July 18, casts a vast net covering mining, investments, and payments involving cryptocurrencies. This development marks a significant shift in Kuwait’s stance on cryptocurrencies, previously recognized as one of the world’s cheapest places for Bitcoin mining due to its heavily subsidized electricity.
Kuwait’s absolute prohibition on Cryptocurrencies
The ban comes into effect immediately and includes the prohibition of local regulators issuing licenses for firms to provide commercial virtual asset services. In the circular detailing the new regulatory landscape, the CMA emphasized that securities and other financial instruments under the supervision of the Central Bank of Kuwait and the CMA are exempt from this prohibition.
The regulatory body further alerted customers to the potential risks of using virtual assets, singling out cryptocurrencies as entities lacking legal status and neither issued nor supported by any authority or asset. This situation, the regulator argued, leaves the prices of these assets susceptible to speculation and steep declines.
The motivations driving this rigorous ban emerge from Kuwait’s commitment to enforcing anti money laundering (AML) rules and combating terrorism financing (CTF). In the circular, the CMA refers to a study by the National Committee for Combating Money Laundering and Financing of Terrorism, highlighting the need to implement recommendation 15 by the Financial Action Task Force. The regulator reiterated that the punitive measures for breaching Kuwait’s Anti-Money Laundering laws are outlined in Article 15 of Law No. 106 of 2013.
Coordination among Kuwaiti authorities
According to local news, this move is part of a larger inter-departmental crypto ban, with several supervisory authorities in Kuwait, including the country’s Central Bank, the Ministry of Commerce and Industry, and the Insurance Regulatory Unit, issuing similar circulars. These authorities have raised awareness and warned about the inherent risks of trading or investing in these volatile assets.
It is crucial to note that in 2021, the Ministry of Finance reportedly declared that it did not recognize Bitcoin, and trading in the virtual currency was banned among financial institutions. While the ministry and the central bank could not regulate Bitcoin trading due to its internet-based nature, the spike in BTC prices prompted the apex financial institution in Kuwait to disallow financial bodies, banks, and affiliated companies from trading Bitcoin.
Previous stance on virtual assets
Conversely, in 2022, Visual Capitalist identified Kuwait as the most cost-effective location worldwide for Bitcoin mining. Owing to its subsidized electricity and low taxation, particularly for individual investors, mining a single Bitcoin in Kuwait was approximately $1,393.95, significantly cheaper than the $4,181.86 cost in Angola, the second most affordable location.
Kuwait’s latest ban on cryptocurrency activities signifies a substantial shift in its policy on digital assets. It underlines the complexities nations face when trying to regulate a decentralized, internet-based currency while balancing the need to protect its citizens and maintain its commitment to combat financial crimes. While this may appear a setback for cryptocurrency proponents, it could foster a more cautious approach to dealing with digital currencies worldwide.