Angelika Hellweger of Rahman Ravelli assesses Kuwait's decision to prohibit cryptoassets.
Kuwait has announced that the country is committed to banning almost all cryptoasset operations within its borders.
Kuwait's main financial regulator, the Capital Markets Authority (CMA), has issued a circular about the supervision and supply of virtual assets in the country.
In it, the CMA confirms a commitment to "absolute prohibition" of operations involving cryptocurrencies, including payments, investments and mining. It also bans local regulators from issuing licences allowing firms to provide virtual asset services.
Securities and other financial instruments regulated by the Central Bank of Kuwait and the CMA are, however, not subject to prohibition.
The CMA has called on customers to be cautious and aware of the risks associated with virtual assets. It has particularly emphasised the dangers associated with cryptocurrencies.
The CMA says that cryptocurrencies "don't carry a legal status and are not issued or supported''. It warns that they are "not linked to any asset or issuer, and that the prices of these assets are always driven by speculation that exposes them to a sharp decline."
The regulator has said that the new regulations are designed to align with the country's measures to combat money laundering and terrorist financing. It has emphasised that the penalties for violating Kuwait's Anti-Money Laundering laws are stipulated in Article 15 of Law No. 106 of 2013.
The CMA's crypto restrictions are being viewed in the country as part of a new inter-departmental crypto ban involving several Kuwaiti supervisory authorities. Similar circulars have reportedly been issued by the Central Bank of Kuwait, the Ministry of Commerce and Industry and the Insurance Regulatory Unit.
Kuwait, however, is not the only state in the Middle East and North Africa (MENA) region to be taking such a stance. Qatar, Libya and Morocco have also implemented an outright ban on cryptocurrency. But Saudi Arabia appears to be reconsidering its approach, five years after confirming that an outright ban on cryptocurrency was in place in the kingdom. It has now appointed someone to lead its virtual assets and central bank digital currency programme.
At this stage, it remains to be seen whether the ban on cryptocurrency will have a big impact on the number of Kuwaitis owning or trading cryptocurrencies. It is worth pointing out that although the Saudi Arabian Monetary Authority (SAMA) warned Saudis against using cryptocurrencies when it banned them in 2018, a survey conducted by KuCoin exchange four years later revealed that three million Saudis either owned them or had previously traded them.
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