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Citing a recommendation by the Financial Assets Task Force (FATF), the Kuwaiti authorities have promulgated bans across a range of crypto activities.
According to the Kuwaiti Capital Markets Authority, in a circular published on Monday, it has banned all crypto-related activities by companies, it has placed an absolute ban on all digital asset mining, and, into the bargain, has prohibited that crypto be recognised as a decentralised currency.
The only exception to this 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 excluded from this prohibition,"
The Kuwaiti anti-crypto actions were purportedly taken in order to come into line with recommendations from the Financial Action Task Force (FATF), a global financial organisation that is obliging nation states to come into compliance for what it sees as anti money-laundering (AML) and terrorist financing threats.
However, according to an article on Coindesk, the FATF has not asked countries to ban crypto. Be that as it may, this regulator holds much power, and not complying with its ‘recommendations’ can land a country onto the FATF blacklist.
Some might argue that the FATF’s recommendations do more harm than good from an economic perspective. There are cases where banks pull out of lending to countries in poorer regions of the world because they fear the fines they can incur from the added difficulty of being able to adequately identify customers.
Also, the cost of running the organisation should be measured against the costs of the illegal activity it is purportedly stopping. AML has now entered into almost every financial activity that a government can make, and the costs of compliance that all companies have to endure just to be able to go about their business can be a reason for concern.
In Springer Link, under “Crime, Law and Social Change” author Mark. T. Nance goes into a deep dive on the FATF. In the introduction he asks the question as to how there can be an increase in illicit money at the same time as the “global governance regime” is getting bigger to fight it.
He looks at the expert detractors of the FATF, and what they say makes interesting reading:
“Detractors portray FATF as a faceless, unaccountable, de facto global regulatory agency run amok. On behalf of the interests of a few select states, it imposes regulations that are illegitimate and costly. For these critics, the Panama Papers are evidence that the rules are ineffective, to boot.”
Banning an emerging technology in order to become compliant with an agency controlled by certain countries, with their own interests in mind is certainly a difficult call for Kuwait to make. Emerging technology has never been suppressed for long, therefore Kuwait may eventually see fit to reverse its decision.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.