Kuwait Says No to Crypto 🚫

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20 Jul 2023

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Kuwait has joined the list of countries that have banned cryptocurrency and virtual asset transactions in their territory. The decision was announced by the Capital Markets Authority (CMA), the main financial regulator in Kuwait, on July 18, 2023.

The CMA issued a circular on the supervision and issuance of virtual assets in the country, stating that it is committed to an “absolute prohibition” of all crypto-related activities, including payments, investments, and mining.

The circular also forbids any local regulators from granting licenses to firms that provide virtual asset services as a commercial business. The only exception is for securities and other financial instruments that are regulated by the Central Bank of Kuwait and the CMA.

Why Did Kuwait Ban Crypto? 🤔

According to the CMA, the ban on crypto and virtual assets is part of Kuwait’s efforts to combat money laundering and terrorist financing. The regulator cited the recommendations of the Financial Action Task Force (FATF), an intergovernmental body that sets standards for anti-money laundering and counter-terrorism financing policies.

The CMA also warned customers about the risks associated with dealing with virtual assets, especially cryptocurrencies. The regulator claimed that cryptocurrencies “don’t carry a legal status and are not issued or supported” by any authority or asset.

The CMA added that the prices of these assets are always driven by speculation, which exposes them to a sharp decline. The regulator reminded customers that they are solely responsible for any losses or damages resulting from their involvement with virtual assets.

What Are the Consequences of the Ban? 😱

The ban on crypto and virtual assets transactions in Kuwait means that anyone who violates the law could face legal penalties under the Article (15) of Law No. 106 of 2013, which deals with anti-money laundering and terrorist financing offenses.

The ban also affects any businesses or individuals who use cryptocurrencies as a tool or means of payment or investment. This could include online merchants, freelancers, remittance services, or crypto exchanges.

The ban also extends to crypto mining activities, which involve using computer power to generate new coins and validate transactions on a blockchain network. This could impact anyone who owns or operates mining equipment or participates in mining pools.

How Does Kuwait Compare to Other Countries? 🌎

Kuwait is not the first country to ban crypto and virtual assets transactions. Several other jurisdictions have taken similar measures in recent years, citing various reasons such as financial stability, consumer protection, national security, or religious compliance.
Some examples of countries that have banned or restricted crypto and virtual assets transactions include:

China: The world’s largest crypto market has been cracking down on crypto activities since 2017, when it banned initial coin offerings (ICOs) and domestic crypto exchanges. In 2021, it intensified its efforts by banning crypto mining and blocking access to foreign crypto platforms.
India: The second-most populous country has been sending mixed signals about its stance on crypto for years. In 2018, it banned banks from dealing with crypto entities, effectively cutting off access to fiat-to-crypto services. In 2021, it proposed a bill to criminalize all crypto activities, but later softened its tone and suggested regulating crypto as an asset class.
Iran: The oil-rich country has been ambivalent about crypto, sometimes embracing it as a way to circumvent US sanctions, and sometimes banning it as a threat to its economy. In 2019, it legalized crypto mining as an industrial activity but imposed strict regulations and licensing requirements. In 2021, it temporarily banned crypto mining due to power shortages.
Pakistan: The Islamic republic has been hostile to crypto since 2018, when it prohibited banks from facilitating crypto transactions. In 2021, it announced plans to introduce a digital currency by 2025, but also warned citizens against using cryptocurrencies for illegal purposes.
Turkey: The emerging economy has seen a surge in crypto adoption amid currency devaluation and inflation. However, in 2021, it banned the use of cryptocurrencies as a form of payment and required crypto service providers to register with the central bank.

What Do You Think? 💬

Kuwait’s ban on crypto and virtual assets transactions is a major setback for the development and innovation of the blockchain industry in the country. It also deprives Kuwaiti citizens of the opportunity to access alternative forms of money and finance that could benefit them in various ways.

However, some might argue that the ban is justified by the need to protect the national interests and security of Kuwait, as well as the welfare and safety of its customers. They might also point out that crypto and virtual assets are still immature and risky, and that they pose challenges for regulation and supervision.

What do you think about Kuwait’s ban on crypto and virtual assets transactions? Do you agree or disagree with the decision? How do you think it will affect the future of crypto and blockchain in Kuwait and the region? Share your thoughts and opinions in the comments below!

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