Jordan -- Securities Classification Regulatory Overview

Jordan has adopted a cautious and generally restrictive approach to cryptocurrencies. While the Central Bank of Jordan (CBJ) has issued broad prohibitions regarding the use and trading of cryptocurrencies, the Jordan Securities Commission (JSC) is the primary body responsible for classifying cryptocurrency tokens as securities when they meet certain criteria under existing securities laws.

1. Legal Test Used (Howey Test Equivalent)

The Jordan Securities Commission (JSC) does not explicitly refer to the "Howey test" by name. However, its approach to classifying virtual assets as securities is highly analogous and relies on an "investment contract" analysis that considers the economic substance of the transaction over its form.

The JSC's classification hinges on whether a virtual asset represents:

• An Investment of Money: An investor commits capital or assets.
• In a Common Enterprise: The investor's funds are pooled with others, and there's interdependence between the fortunes of the investors and the success of the enterprise.
• With an Expectation of Profit: The investor anticipates financial gain.
• Derived Solely (or Predominantly) from the Efforts of Others: The success of the investment relies on the managerial or entrepreneurial efforts of the issuer or a third party, rather than the efforts of the investor.

This "substance over form" approach means that any token, regardless of its technical designation (e.g., "utility token"), could be deemed a security if it functions as an investment contract.

Key Legislation/Guidance:

• Jordan Securities Commission Law No. 18 of 2017: This foundational law defines "securities" broadly, encompassing various financial instruments that represent an investment.
• JSC Circular No. 12/1/1/1043 dated April 27, 2021, on Virtual Assets: This circular provides initial guidance, stating that virtual assets that meet the definition of "securities" under the JSC Law are subject to its regulatory oversight.
• JSC's "Regulatory Guidance on Virtual Assets" (subsequently issued or elaborated upon): This guidance further details how the JSC applies existing securities laws to various types of virtual assets, emphasizing the investment contract analysis.

2. Which Tokens are Considered Securities

Based on the investment contract analysis, the JSC would generally consider the following types of tokens as securities:

• Investment Tokens (Security Tokens): These are tokens that represent traditional securities like equity, debt, shares in a fund, or a participation in future profits or revenue streams of a company or project. They are explicitly designed to be investment vehicles.
• Certain Utility Tokens: A token initially marketed or sold with an emphasis on its potential for appreciation or profit before its utility is fully developed or widely adopted is likely to be classified as a security. If purchasers are primarily buying the token with an expectation of reselling it for a profit, rather than for its immediate functional use, it can be a security. The "Simple Agreement for Future Tokens" (SAFT) model, often used for utility tokens, can also be deemed a security offering.
• Certain Stablecoins: While less common, if a stablecoin offers features beyond pure price stability against a fiat currency, such as a promise of yield or return generated from the issuer's management of reserve assets, it could potentially be classified as a security. However, the CBJ's overarching prohibition makes the practical implications complex.

Tokens NOT typically considered securities (but still face CBJ prohibition):

• Pure Payment/Currency Tokens: If a token is solely intended and functions as a medium of exchange or unit of account without any investment characteristics, it would generally not be classified as a security by the JSC. However, the Central Bank of Jordan (CBJ) has explicitly prohibited the use and trading of cryptocurrencies within Jordan as they are not recognized as legal tender.

3. Registration/Exemption Requirements for Token Issuers

If a cryptocurrency token is classified as a security by the JSC, then its offering, sale, and subsequent trading are subject to the full regulatory framework for securities. This entails:

• Registration of the Offering: Issuers must register their public offerings with the JSC and provide a comprehensive prospectus or offering document. This document must contain detailed information about the issuer, the project, the token, risks, financial statements, and use of proceeds.
• Disclosure Requirements: Ongoing disclosure obligations apply, including periodic financial reports, material event disclosures, and investor relations.
• Licensing: Any entity involved in advising on, distributing, or managing such security tokens would likely need to be licensed by the JSC.

Exemptions: Standard exemptions available under the JSC Law for traditional securities (e.g., private placements to sophisticated investors, small offerings below a certain threshold) might apply, but there are no specific blanket exemptions tailored for cryptocurrency tokens. The default presumption for public offerings of security tokens is full registration.

4. Secondary Trading Rules

If a token is classified as a security, its secondary trading must comply with established securities market rules:

• Licensed Trading Venues: Security tokens must be traded on regulated exchanges or platforms licensed and supervised by the JSC. Unlicensed cryptocurrency exchanges would not be permitted to facilitate the trading of security tokens.
• Market Integrity Rules: Rules regarding market manipulation, insider trading, fair disclosure, and best execution would apply.
• Brokerage/Custody: Entities providing brokerage or custody services for security tokens would need to be licensed by the JSC.

5. Enforcement Examples

Jordan's enforcement approach has primarily been preventive and broad, spearheaded by the Central Bank of Jordan, which has taken a very firm stance against cryptocurrencies generally.

• CBJ's General Prohibition: The most significant "enforcement" has been the CBJ's repeated official warnings and circulars prohibiting banks, payment service providers, and individuals from dealing in, trading, or facilitating transactions involving cryptocurrencies. This includes a circular issued as early as 2017 and reiterated in 2021. These warnings effectively act as a blanket ban on general crypto activity, making the JSC's classification of some crypto as securities somewhat secondary to the broader prohibition.
  • Example: In 2017, the CBJ issued a circular stating that cryptocurrencies are "not legal tender" in Jordan and warning against their use. This was reinforced by a similar circular in 2021.
• Lack of Specific JSC Cases: While the JSC has established the framework for classifying virtual assets as securities, there haven't been widely publicized individual enforcement actions (fines, charges against specific token issuers) comparable to those seen in jurisdictions like the US or UK. This is likely due to the CBJ's broader prohibition creating a less active market for these assets, as well as the nascent stage of the virtual asset market in Jordan.
• AML/CFT Compliance: The Anti-Money Laundering and Counter-Terrorist Financing Unit (AML/CFT Unit) in Jordan would also be involved in any financial activity related to virtual assets, ensuring compliance with international standards for combating financial crime.

Specific Legislation and Regulatory Guidance URLs:

Finding direct, stable, English-translated official URLs for Jordanian regulatory circulars can sometimes be challenging. Often, these are released in Arabic and may be available on the regulator's main site without direct deep links or dedicated English sections for every document.

1. Jordan Securities Commission (JSC) Official Website:

   • https://www.jsc.gov.jo/
   • You would typically search the "Laws and Regulations" or "Circulars" section for the JSC Law No. 18 of 2017 and any circulars pertaining to "Virtual Assets" or "Cryptocurrencies." The April 2021 circular would be a key document to look for.

2. Central Bank of Jordan (CBJ) Official Website:

   • https://www.cbj.gov.jo/
   • Look for press releases, circulars, or warnings regarding "cryptocurrencies," "virtual assets," or "digital currencies." The CBJ's strong stance has been communicated through several such public notices. For example, circulars issued in 2017 and 2021 explicitly prohibited dealing in cryptocurrencies.

Please note: The exact deep links to specific circulars might change or require navigation through the official websites' document archives, which are predominantly in Arabic.