Central Bank of Kuwait yet again warns against riskiness of cryptocurrencies

In a press release published by the Central Bank of Kuwait, the bank stated, ” In an effort to enhance financial awareness and encourage the Kuwaiti banking sector’s social responsibility activities, the Central Bank of Kuwait is presenting  information around the high risks of crypto-assets. This comes as part of the CBK-supervised “Diraya” campaign (Be Aware in Arabic) which is managed by Kuwait Banking Association (KBA) with the participation of all Kuwaiti banks.” 

 

The statement adds, that amid the notable increase in promotion of and calls for investment and dealing in crypto-assets, sometimes referred to as crypto “currencies”, the CBK reiterates that such assets can in no way be compared to real currency.

 

According to Kuwait Central Bank, real currency is issued by a lawful state as currency and as a symbol of sovereignty, is regulated by state authorities such as central banks or monetary institutions, is considered and accepted as a store of value and legal tender, and serves as a reliable medium for exchange. Furthermore, states strive to protect their real currency and employ policies that guarantee relative stability of the exchange rate against major world currencies.

 

A such once again the CBK  issued its cautions against dealing in crypto-assets, such as Bitcoin, Ethereum, Dogecoin, etc. Such dealings come at a high risk and with an array of negative consequences for dealers in view of the nature of these assets and the high fluctuation in their prices. These assets are not subject to regulation or supervision by any authority in the State of Kuwait, which could mean great losses for speculators and increased risk of fraud. Accordingly, trading in crypto-assets is a high risk, especially for individuals.

 

International institutions, such as the Bank for International Settlements (BIS) and several central banks, have all pointed out the risks involved in such trade in view of the wild fluctuation seen in the value of these assets over a short period of time and in the difficulty to supervise them and follow up on relevant developments and provide any type of security for the systems/devices used by traders and speculators, in addition to lack of any institution or body that can control or regulate this market. Moreover, such assets pose a threat to the global financial system and to people’s fortunes, especially since the transactions can be carried out through illegal/bogus wallets or organizations, which could lead and direct individuals’ funds beyond the guarantees of official trading protocols/guidelines.

 

Dealing in crypto-assets offered by unidentified issuers and traded under fictitious names leaves wide room for illegal uses of funds, unauthorized transactions, and money laundering since the assets are not under the control of any central authority, in addition to the threat of digital breaches and attacks. This, in addition to the high energy use of mining operations, adds an environmental aspect to the threat.

 

The CBK had in recent years instructed local banks to take adequate measures to increase their customers’ awareness of the risk involved in dealing with crypto- assets. The anti money laundering commitee in Kuwait had at one point asked the Central bank to either regulate crypto or ban it.