Central Bank of Kuwait Introduces New Initiatives to Foster Fintech Growth

The Central Bank of Kuwait (CBK) has taken significant steps to promote the growth and development of financial technology (Fintech) in the country’s banking sector. The CBK aims to encourage innovation in the financial services industry while ensuring regulatory compliance.

Regulatory Sandbox Framework: A Four-Stage Process

The Regulatory Sandbox Framework allows companies and individuals that provide Fintech products or services to apply for temporary exemption from certain regulatory or licensing requirements. To qualify, applicants must meet specific eligibility criteria:

• Launch in the Local Market: The product or service must be launched in Kuwait.
• Compliance with Laws and Regulations: The applicant’s product or service must not contravene Kuwaiti laws and regulations.
• Benefits to Customers and Markets: The product or service must have benefits for both customers and markets.
• Advanced Stage of Development: The applicant’s product or service must be in an advanced stage of development.

The Regulatory Sandbox Framework has a four-stage process:

1. Application: Applicants submit their application to the CBK.
2. Evaluation: The CBK thoroughly evaluates applicants from technical, security, and regulatory aspects.
3. Experimental: Testing includes measuring compliance with existing regulations, verifying security measures, and maintaining confidentiality and privacy standards.
4. Accreditation: If successful, the applicant is accredited and can continue to operate in Kuwait.

E-Payment Regulation: Registration and Licensing Requirements

The CBK has issued Resolution No. 44/430 of 2018 to regulate electronic payment activities in Kuwait. Electronic Payment Infrastructure Providers (EPIPs) and Electronic Payment Agents (EPAs) must register and license with the CBK. EPIPs are financial institutions that perform all or part of electronic payment and settlement systems, while EPAs practice all or part of the activities of EPIPs.

The registration application submitted to the CBK includes:

• A Letter of Guarantee
• Copies of constitutional documents
• A three-year business plan for the company

EPIPs and EPAs must comply with specific requirements for carrying out activity services and handling confidential information as stipulated in the E-Payment Regulation.

Regulatory Caution: Cryptocurrencies

While promoting Fintech growth, the CBK remains cautious about certain products and services, such as cryptocurrencies. The regulator has cautioned against dealing in crypto-assets due to their lack of regulation and supervision, which can lead to major losses for speculators and increased risk of fraud.

Conclusion

The Kuwait regulatory environment in the Fintech space has been slower to develop than some of its GCC neighbors, but the CBK’s initiatives aim to foster growth while ensuring regulatory compliance. For further information on this topic, please contact Omar Handoush at o.handoush@tamimi.com.