Title: Circular No. (10) of 2023 "Circular to All Financial Institutions and Specified Non-Financial Businesses and Professions" Regarding the Procedures Required for Transactions Associated to Virtual Assets
Within the scope of enhancing efforts related to Anti-Money Laundering and Combating the Financing of Terrorism, and based on the study prepared by the National Committee for Anti-Money Laundering and Combating the Financing of Terrorism regarding the required compliance with Recommendation (15) of the international requirements issued by the Financial Action Task Force (FATF) regarding transactions involving virtual assets, which are defined as assets that have a digital representation of their value, that can be traded or transferred digitally and can be used for payment or investment purposes. Recommendation (15) stipulates that virtual assets should be considered as “property”, “revenue”, “funds”, “money or other assets" or "other equivalent value", noting that virtual assets do not include digital representations of paper currencies, securities and other financial assets that were addressed in another part of the FATF recommendations. We emphasize the following:
- Absolute prohibition on using virtual assets as a payment tool/currency or recognizing them as a decentralized currency in the State of Kuwait. Therefore, you shall refrain from conducting transactions that involve using virtual currencies as a payment tool within the scope of this ban.
- Prohibition of dealing with virtual assets as an investment medium, thus refraining from providing this type of service to any clients.
- Prohibition of issuing or granting any natural or legal entity within the State of Kuwait a license to provide virtual asset services as a commercial business for their own benefit or on behalf of others (in addition to no previous licenses being issued in this regard).
- Securities regulated by the Central Bank of Kuwait and other securities and financial instruments regulated by the CMA are exempted from this prohibition.
- Absolute ban on all activities related to mining virtual assets/currencies..
Furthermore, it is required to constantly inform clients about the risks associated with dealing in virtual assets (which are executed outside the State of Kuwait with the knowledge of clients), especially crypto currencies, as they lack legal status and are not issued or endorsed by any government. They are also not linked to any underlying asset or issuing entity, and their prices are always subject to speculative fluctuations that may lead to significant decline.
The measures or penalties stipulated in Article (15) of Law No. 106 of 2013 on Anti-Money Laundering and Combating the Financing of Terrorism apply to anyone who violates this circular, without prejudice to the penalties stipulated by each regulatory authority.
Prof. Ahmad Al-Melhem
Issued on: 17/07/2023.