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faster and faster and therefore result in
considerable losses to the majority of investors.
2. Cryptocurrencies as “financial bubbles”:
In late 2007, a financial crisis shook the global
economy, stemming from the U.S. subprime
mortgage crisis. The problem started when
small banks began to offer mortgages to many
subprime borrowers despite knowing they had
poor or no credit history and could not possibly
pay back the mortgages they were offered.
Consequently, many borrowers were unable
to pay back their mortgages. Several people
had lost their homes, and the investment banks
started to lose money and therefore collapse,
causing a global turmoil of which effects have
not yet been fully recovered.
Indeed, the case with the digital currencies
market is a lot worse. In a real estate bubble,
the problem would affect productive sectors
that have a well-set work plan and typically
stable outcomes and profits, unlike digital
currencies in which earning of profits is merely
driven by attracting more investors. As soon
as there are no new investors interested in the
digital currency, it will eventually collapse.
Theme Six: the role of SAIs in auditing
crypto/ virtual/ digital currencies
The role of regulatory bodies in other countries:
The Saudi Arabian Monetary Authority (SAMA)
and the Bank of Canada (BoC) have warned
about the implications of trading with digital
currencies, believing that digital currencies
are beyond federal control, merely driven by
speculations, and have no intrinsic value.
International Monetary Fund (IMF): the chair
of IMF highlighted that it is only a matter of
time before cryptocurrencies come under
government regulation. She added that this step
is inevitable and should be undertaken at an
international level. Further, the IMF believes that
there is a need to have a considerable amount
of activities regulating cryptocurrencies.
The Role of regulatory bodies in the State of
Kuwait:
1. The Central Bank of Kuwait (CBK):
• CBK has prepared a number of studies on the
concept of digital currencies and the methods
for using and trading with such currencies.
• CBK verifies that local banks are not dealing
with digital currencies and ensures that banks
are fully aware of the risks of using digital
currencies. Besides, CBK is committed to
sending official letters to the Kuwait Banking
Association and the Ministry of Commerce
and Industry on urging entities subject to their
control to take appropriate measures to raise
the clients’ awareness of cryptocurrency-
associated risks.
• CBK, in collaboration with the Institute of
Banking Studies, had issued an outreach
leaflet under the name of “Flashes” in May
2016. This publication introduces the definition
of a currency, money, and cryptocurrency,
particularly Bitcoin. It also highlighted the risks
of investing in cryptocurrencies as well as their
criminal misuse and regulations.
2. Capital Markets Authority (CMA):
• CMA has conducted numerous studies on
digital currencies and their associated risks.
• CMA has warned, via its official website,
against investing in digital currencies and
engaging in their initial launches. Under this
warning, CMA highlighted the significant risks
associated with digital currencies and the
fluctuation of their prices.
Research
