Kuwait Cracks Down on Crypto to Combat Financial Crimes
New Regulations Aim to Prevent Money Laundering and Terror Financing
In a bid to comply with global recommendations from the Financial Action Task Force (FATF), Kuwait’s Capital Markets Authority has issued a circular banning the use of cryptocurrencies for payments or investments. The move is aimed at preventing money laundering and adhering to FATF’s travel rule, which requires crypto firms to collect and share data on transactions above a certain threshold.
Key Prohibitions
- Use of Cryptocurrencies: The ban prohibits the use of cryptocurrencies for payments or investments.
- Digital Asset Mining: Companies are not allowed to engage in digital asset mining.
- Recognition as Decentralized Currencies: Cryptocurrencies cannot be recognized as decentralized currencies.
- Crypto-Related Services: Companies are prohibited from providing any type of crypto-related services, with the exception of securities regulated by the Central Bank of Kuwait and other financial instruments regulated by the Capital Markets Authority.
Background
The National Committee for Combating Money Laundering and Financing of Terrorism conducted a study into the sector, which led to the implementation of these prohibitions. The regulator warned citizens of the risks associated with volatile and encrypted currencies that do not have legal status, stating that any violations of the prohibitions would result in penalties.
Global Implications
The FATF has not requested countries to ban cryptocurrencies, but rather implement guardrails to prevent money laundering. Kuwait’s move marks one of the most stringent measures taken by a country to regulate the use of cryptocurrencies. The ban is expected to have significant implications for companies operating in the crypto sector within Kuwait.
Exceptions and Enforcement
The Capital Markets Authority’s circular emphasized that securities regulated by the Central Bank of Kuwait and other financial instruments regulated by the authority are excluded from the prohibition, providing some clarity on what types of activities will be allowed to continue under the new regulations. However, the specifics of how the ban will be enforced and what penalties will be imposed remain unclear at this time.
Conclusion
The move is seen as a significant development in Kuwait’s efforts to regulate the use of cryptocurrencies and combat financial crimes. As the global cryptocurrency market continues to evolve, countries are increasingly implementing measures to ensure that the sector operates within established regulatory frameworks.