Kuwait prohibits all cryptocurrency use in new virtual assets ban

DUBAI — Kuwait has banned all virtual asset transactions, investments and mining, according to an online statement released on Tuesday by the country’s Capital Markets Authority (CMA).

Virtual assets are defined as any asset that has digital representation of their value, that can be treated or digitally transferred, or can be used for payment or investment purposes, according to global watchdog the Financial Action Task Force (FATF). The CMA statement further clarifies that mining cryptocurrencies, a function needed to verify and process transactions, is also prohibited. 

Based on these definition, this means that Kuwaiti residents are also banned from selling or buying non-fungible tokens, gaming tokens and other similar assets that are digital, decentralized and hold financial value. However, digital representations of paper currencies, securities and other financial assets are excluded from the ban, according to the CMA statement. 

The authority also issued a warning about virtual assets being high risk with prices based on speculation that expose them to sharp and sudden declines.

Users of cryptocurrencies and other virtual assets in Kuwait would be subject to Kuwait’s 2013 money laundering and terrorist financing laws, which if breached “could subject the parties to all penalties, financial or sentences of imprisonment, which are stipulated in Article (20) of the ministerial resolution,” according to the Central Bank of Kuwait. 

Other Middle East and North African countries that have heavy restrictions or full official bans on the use of cryptocurrencies include Algeria, Egypt, Morocco, Tunisia, Saudi Arabia, Qatar, Jordan, Turkey, Iran and Iraq, according to Texas-based firm Freeman Law, American personal finance brand Money and also government sources. 

On the other hand, Bahrain and the United Arab Emirates are among the few countries in the region to allow and encourage the use of cryptocurrencies as they seek to build their virtual asset markets and draw in high-net worth individuals, as indicated by business journalist Sebastian Castelier in an Al-Monitor PRO memo published in July 2022. 

Binance — the world’s largest cryptocurrency exchange — was first granted a license in March 2022 to conduct operations in Dubai and has achieved more licenses to practice since. Two months later, in May, Dubai established the Virtual Assets Regulatory Authority to create guidelines and legal frameworks for the uses of virtual assets.