The Legislative Landscape for Cryptocurrencies in Kuwait Prior to 2024

As of 2022, Kuwait had a distinctive stance on cryptocurrencies that was primarily characterized by prohibitive measures. The country’s financial authorities, including the Ministry of Finance and the Central Bank of Kuwait (CBK), had established a firm stance against the recognition and use of cryptocurrencies in official commercial transactions. The CBK, in particular, prohibited the banking sector and companies under its jurisdiction from trading in cryptocurrencies. This prohibition extended to the acceptance of cryptocurrencies in e-payment transactions and acting as mediators in cryptocurrency transactions​​.

In a significant development, the Capital Markets Authority (CMA) of Kuwait introduced a comprehensive ban on cryptocurrency usage. This move was aimed at combating money laundering and financial risks, and it placed an “absolute prohibition” on the use of digital currencies for payments or investments within the country. The CMA’s regulations categorized all virtual assets, including cryptocurrencies, as illegal for transactions. Furthermore, this ban extended to digital asset mining, rendering such activities strictly prohibited in Kuwait. The circular issued by the CMA, in collaboration with other regulatory bodies, emphasized that cryptocurrencies were not recognized as decentralized currencies. The CMA’s actions aligned with Recommendation No. 15 issued by the Financial Action Task Force (FATF), underscoring Kuwait’s commitment to combating money laundering and terrorism financing. However, securities regulated by the CBK and other financial instruments regulated by the CMA were excluded from this prohibition​​​​.

In contrast to its strict stance on cryptocurrencies, the CBK announced in January 2018 its intention to create infrastructure for a local digital currency, distinct from virtual currencies. This digital currency was to be part of the e-payments landscape and was expected to possess characteristics akin to paper money, such as an issuance number. The CBK highlighted that this local digital currency would be government-monitored and could be exchanged with other currencies as well as used to pay for goods and services​​.

Overall, Kuwait’s legislative approach to cryptocurrencies prior to 2024 was marked by stringent regulations and prohibitions, particularly aimed at preventing the use of cryptocurrencies in financial transactions and mining activities. At the same time, the country showed interest in exploring the potential of a state-backed digital currency, indicating a nuanced approach towards digital financial technologies.