Citing recommendations from the Financial Assets Task Force (FATF), Kuwaiti authorities have issued a ban on a range of cryptocurrency activities.
According to the Kuwait Capital Market Authority, in a circular issued on Monday, the agency has banned companies from all cryptocurrency-related activities, absolutely banned all digital asset mining, and banned cryptocurrencies as decentralized currencies.
The only exceptions are securities regulated by the Central Bank or the Capital Markets Authority.
“Securities regulated by the Central Bank of Kuwait and other securities and financial instruments regulated by the Capital Markets Authority are exempt from this prohibition,”
Kuwait’s anti-crypto action is said to be in line with the recommendations of the Financial Action Task Force (FATF), a global financial body that requires countries to comply with what it considers anti-money laundering (AML) and terrorist financing threats.
However, according to a article On Coindesk, the FATF is not asking countries to ban cryptocurrencies. Still, the regulator wields a lot of power, and failure to follow its “advice” could put a country on the FATF blacklist.
Some might argue that, from an economic standpoint, the FATF recommendations do more harm than good. In some cases, banks have stopped lending to countries in poorer parts of the world for fear of incurring fines for making it difficult to adequately identify customers.
Additionally, the organization’s operating costs should be measured against the cost of the illegal activities the organization purportedly seeks to prevent. Now that anti-money laundering has permeated nearly every financial activity that governments can do, the cost of compliance that all companies must incur in order to do business can be worrisome.
In Springer Links, “Crime, Law, and Social Change” author Mark. Enter T. Nance Deep Dive into FATF. In his introduction, he poses the question of how illicit funding can increase at the same time that the “system of global governance” is growing to combat it.
He examines expert critics of FATF, and their statements are interesting to read:
“To these critics, the FATF is portrayed as a faceless, irresponsible, and de facto overbearing global regulator. It represents the interests of a handful of states and has imposed illegal and costly regulations. To these critics, the Panama Papers prove that these rules are ineffective.”
For Kuwait, banning an emerging technology in order to comply with the regulations of certain state-controlled agencies and take into account the self-interest of these countries is undoubtedly a difficult call. Emerging technologies have never been suppressed for long, so Kuwait may eventually reverse its decision.
Disclaimer: This article is for informational purposes only. It does not provide or be intended to be used as legal, tax, investment, financial or other advice.