Cameroon -- Securities Classification Regulatory Overview

Cameroon, as a member state of the Central African Economic and Monetary Community (CEMAC), primarily defers to the regional financial market regulator, the Commission de Surveillance du Marché Financier de l'Afrique Centrale (COSUMAF), and the regional central bank, the Banque des États de l'Afrique Centrale (BEAC), for guidance on financial instruments and monetary policy.

There is currently no specific, dedicated legislation in Cameroon or CEMAC that exclusively addresses the classification of cryptocurrency tokens as securities. Instead, COSUMAF applies a "substance over form" approach, adapting existing financial market regulations to determine if a crypto asset meets the definition of a "financial instrument" or "security."

1. Legal Test Used (Equivalent to Howey Test)

Cameroon, through COSUMAF, does not explicitly use a "Howey test" equivalent. Instead, the assessment is based on whether a token falls within the definition of "securities" (titres) or "financial instruments" as defined by Règlement N° 04/CM/COSUMAF/2019 du 07 Octobre 2019 relatif aux offres au public de titres et aux instruments financiers (Regulation No. 04/CM/COSUMAF/2019 of October 7, 2019, on public offerings of securities and financial instruments).

The key principles guiding this classification, implicitly drawing on similar concepts to the Howey test but framed within traditional securities law, include:

• Investment of Money: Is there an expectation of providing capital in exchange for the token?
• Expectation of Profit: Is the primary motivation for acquiring the token an expectation of financial return (e.g., dividends, capital appreciation, share in profits) from the issuer's efforts?
• Common Enterprise: Is the success or failure of the investment tied to the efforts of a third party (the issuer or project team)?
• Transferability & Negotiability: Does the token represent a transferable right or interest that can be traded?

If a token exhibits characteristics akin to shares, bonds, or units in a collective investment scheme, it is likely to be classified as a security. The focus is on the economic reality and legal nature of the token, rather than merely its technical form.

2. Which Tokens Are Considered Securities

Based on COSUMAF's approach, the following classifications generally apply:

• Security Tokens: These are tokens explicitly designed to represent traditional financial assets such as:

  • Shares in a company.
  • Bonds or other forms of debt.
  • Units in collective investment undertakings (funds).
  • Rights to future profits or revenue streams.
  • Real estate or other tangible assets.
  • These are unequivocally considered securities and fall under COSUMAF's regulatory purview.

• Investment-Contract Tokens (Hybrid Tokens): Tokens that may offer some utility but are primarily marketed or structured with an expectation of profit derived from the efforts of others (the issuer or project team). If the primary driver for acquiring the token is investment rather than immediate consumption or use of a service, it will likely be treated as a security. This is where the "substance over form" analysis is crucial.

• Stablecoins: Depending on their structure, stablecoins could be considered securities if they are managed by a third party with an expectation of profit for investors, or if they represent a claim on a basket of assets that itself qualifies as a financial instrument. However, they are more often viewed through a monetary or payment lens by the BEAC.

• Tokens Generally NOT Considered Securities (but may face other regulations):

  • Pure Payment Tokens (e.g., Bitcoin, Ethereum): The BEAC has repeatedly declared that cryptocurrencies are not legal tender in the CEMAC zone and has issued warnings regarding their speculative nature and risks. While not classified as securities, their use is highly discouraged and subject to monetary policy scrutiny.
  • Pure Utility Tokens: Tokens that provide immediate access to a specific product or service, without an inherent expectation of profit from the issuer's efforts, are generally not considered securities. However, if they are marketed for future appreciation or grant rights akin to an investment, they could be reclassified.

3. Registration/Exemption Requirements for Token Issuers

If a cryptocurrency token is classified as a security, its issuance and offering must comply with COSUMAF's regulations, particularly Règlement N° 04/CM/COSUMAF/2019.

• Prior Authorization: Any public offering of securities (including security tokens) in the CEMAC zone requires prior authorization from COSUMAF. This is a fundamental requirement.
• Prospectus Requirement: Issuers must prepare and submit a comprehensive prospectus to COSUMAF for approval. This document must contain all material information necessary for investors to make an informed decision, including:
  • Details of the issuer (legal form, management, financial situation).
  • Description of the token/security being offered.
  • Information on the project or underlying assets.
  • Risks associated with the investment.
  • Use of proceeds.
  • Rights conferred by the token.
• Ongoing Reporting: Issuers of authorized securities are subject to ongoing reporting obligations, including financial statements and significant event disclosures.
• Exemptions: The regulation provides for certain exemptions from the prospectus requirement, similar to traditional securities laws. These typically include:
  • Private placements: Offerings made only to qualified investors or a limited number of persons.
  • Offerings below a certain monetary threshold (the regulation specifies thresholds, e.g., for offers whose total value is less than 50 million CFA francs within a 12-month period).
  • Offerings to existing employees under certain conditions.

4. Secondary Trading Rules

Secondary trading of security tokens would fall under the existing rules for financial instruments on a regulated market, as defined by COSUMAF regulations.

• Regulated Markets: Trading of security tokens would theoretically need to occur on exchanges approved and regulated by COSUMAF. Currently, there are no COSUMAF-regulated exchanges specifically for crypto assets.
• Market Conduct Rules: Rules against market manipulation, insider trading, and other illicit practices would apply.
• Intermediaries: Any entity acting as a broker, dealer, or custodian for security tokens would need to be licensed and supervised by COSUMAF as a financial market intermediary.
• Clearing and Settlement: Transactions would need to adhere to the clearing and settlement frameworks overseen by COSUMAF and the BEAC.

The practical implication is that secondary trading of security tokens is extremely difficult, if not impossible, within the existing regulated framework, given the absence of approved crypto-specific infrastructure.

5. Enforcement Examples

Direct enforcement actions by COSUMAF specifically targeting unauthorized public offerings of cryptocurrency tokens as securities are not widely publicized or common. This is largely due to:

• The nascent stage of the crypto market in the region.
• The lack of specific crypto legislation.
• The fact that most crypto activities might not clearly fall under the "securities" definition and are often addressed by the Central Bank (BEAC) from a monetary stability and consumer protection perspective.

However, COSUMAF consistently issues general warnings against unauthorized public offerings of any financial instruments that do not comply with its regulations. Any issuer found to be conducting a public offering of a token deemed a security without COSUMAF's prior authorization would be subject to:

• Cease and Desist Orders: Immediate halt to the offering.
• Fines: Significant monetary penalties.
• Legal Proceedings: Potential criminal charges for illegal public offerings.

BEAC's Enforcement/Guidance: The BEAC has been more vocal regarding cryptocurrencies, primarily focusing on monetary stability and consumer protection. For example:

• Communiqué de Presse n° 001/GR/2021 du 10 Décembre 2021: The BEAC issued a strong warning, reminding the public that virtual assets and cryptocurrencies are not legal tender in the CEMAC region and are not issued or guaranteed by the Central Bank. It highlighted risks such as price volatility, cybercrime, money laundering, and terrorist financing. While not directly about securities classification, this underscores a cautious regulatory environment.

6. Specific Legislation and Regulatory Guidance URLs

• COSUMAF (Commission de Surveillance du Marché Financier de l'Afrique Centrale):

  • Official Website: https://www.cosumaf.org/
  • Règlement N° 04/CM/COSUMAF/2019 du 07 Octobre 2019 relatif aux offres au public de titres et aux instruments financiers: This is the core regulation governing public offerings of securities. You can typically find it in the "Textes Législatifs et Réglementaires" or "Réglementation" section of the COSUMAF website. (A direct link is often unstable, so navigating the site is best).

• BEAC (Banque des États de l'Afrique Centrale):

  • Official Website: https://www.beac.int/
  • Communiqué de Presse n° 001/GR/2021 du 10 Décembre 2021: You would typically find this in the "Publications" or "Communiqués de presse" section of the BEAC website. (Example from a news source referencing it: https://afrique.latribune.fr/economie/politique-economique/2021-12-14/la-beac-rappelle-que-les-cryptomonnaies-ne-sont-pas-une-monnaie-legale-dans-la-cemac-899149.html)

Disclaimer: The regulatory landscape for cryptocurrencies is rapidly evolving. The information provided is based on current understanding and publicly available regulations. It is essential to consult with legal professionals specializing in CEMAC financial law for specific guidance on any crypto-related project in Cameroon.