Kuwait Prohibits Virtual Assets As Payment Methods
In a bid to bolster its fight against money laundering and terrorist financing, the State of Kuwait has taken significant steps to regulate the use of virtual assets within its borders. The National Anti-Money Laundering and Terrorism Financing Committee recently concluded a comprehensive study on compliance with Recommendation (15) of the Financial Action Task Force (FATF), which pertains to dealing with virtual assets.
The Capital Markets Authority (CMA), the financial regulator of Kuwait, a West Asian country, issued a notice on the regulation and issuance of virtual assets in the country, completely prohibiting the use of cryptocurrencies as payment tools/methods, or recognizing them as…
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Kuwait’s Strict Regulations on Virtual Assets
Virtual assets, defined as digital assets with numerical representations of value that can be traded, transferred, and used for payment or investment purposes, are now subject to specific regulations in Kuwait. However, the country explicitly distinguishes virtual assets from digital representations of fiat currencies, securities, and other financial assets that are addressed separately in the FATF recommendations.
The Kuwaiti authorities have issued a stern commitment to combat the misuse of virtual assets in various ways:
- Prohibition of Virtual Assets as Payment Instruments: The use of virtual assets as a payment instrument or means has been absolutely prohibited within the state. All transactions involving virtual currencies as a payment method are strictly forbidden.
- Virtual Assets as Investment Instruments: Kuwaiti authorities have banned dealing with virtual assets as a means of investment. Any service that offers investment opportunities related to virtual assets is strictly prohibited.
- Licensing of Virtual Asset Services: The issuance or granting of licenses to individuals or entities for providing virtual asset services as a business is strictly prohibited. No such licenses have been issued in the past.
- Exemption of Regulated Securities: Securities regulated by the Central Bank of Kuwait and those regulated by the Capital Markets Authority are exempt from the virtual asset ban.
- Prohibition of Asset/Virtual Currency Mining: All activities related to asset or virtual currency mining have been absolutely prohibited.
Penalties for Violators
To further safeguard customers, they will be regularly informed about the risks associated with dealing in virtual assets, particularly cryptocurrencies. These assets are not considered legal tender, lack government backing, and are not tied to any specific asset or issuer. Their prices are often driven by speculation, which exposes investors to the risk of significant value fluctuations.
Kuwaiti authorities are leaving no room for leniency, as violators of these regulations will face severe measures or penalties as stipulated in Article (15) of Law No. 106 of 2013 on Anti-Money Laundering and Combating the Financing of Terrorism. Other supervisory authorities may also apply additional penalties.
This move signals Kuwait’s determination to curb illicit financial activities and protect its citizens from potential risks associated with virtual assets. By adopting these measures, Kuwait aims to align with international standards set forth by the FATF and ensure a more secure financial environment within its borders.
