Senegal -- Securities Classification Regulatory Overview

Senegal, as a member of the West African Economic and Monetary Union (UEMOA), does not have standalone, comprehensive legislation specifically addressing cryptocurrency classification. Instead, it relies on the existing regional financial markets framework, primarily governed by the Conseil Régional de l'Épargne Publique et des Marchés Financiers (CREPMF), which is the capital markets regulator for the UEMOA region. The Banque Centrale des États de l'Afrique de l'Ouest (BCEAO) also plays a role in monetary and payment systems.

The approach is to classify cryptocurrency tokens based on their underlying nature and economic function, applying existing securities laws if they meet the definition of a "financial security" or constitute a "public offering."

1. Legal Test Used (Howey Test Equivalent)

While Senegal (via CREPMF) does not explicitly use the "Howey Test" by name, the underlying principles applied to classify tokens as securities are conceptually similar. The test revolves around whether the token constitutes a "financial security" (valeur mobilière) or an "appeal to public savings" (appel public à l'épargne) as defined by UEMOA regional regulations.

The primary legal text is Regulation N° 02/2009/CM/UEMOA relative à l'organisation du marché financier régional de l'UEMOA. This regulation defines "financial securities" broadly.

CREPMF Communication N° 001/2019/PR/CREPMF du 15 février 2019 specifically addresses "Operations de levée de fonds par le biais de cryptomonnaies ou d’actifs numériques (Initial Coin Offering – ICO)." This communication clarifies CREPMF's stance:

• Substance Over Form: CREPMF will look beyond the technical structure of a token to its economic reality.
• Key Criteria for "Financial Security" / "Public Offering": A token will likely be considered a financial security if it involves:
  • An Investment of Money: Funds are provided by investors.
  • In a Common Enterprise: The funds are pooled to finance a project, company, or protocol.
  • With an Expectation of Profit: Investors anticipate returns (e.g., dividends, capital appreciation, share of revenues) from their investment.
  • Derived Solely or Primarily from the Efforts of Others: The success and profitability of the investment depend on the managerial or entrepreneurial efforts of the issuer or a third party, rather than the investor's own active involvement in managing the project.
  • Appeal to Public Savings: If the offering targets a wide, undifferentiated group of potential investors, it will be deemed a public offering, regardless of the instrument used.

In essence, if a token is marketed or functions as an investment vehicle that promises returns based on the efforts of the issuer, it will likely be treated as a security.

2. Which Tokens Are Considered Securities

Based on the above principles, the following types of tokens are likely to be classified as financial securities:

• Security Tokens: Any token that represents traditional financial instruments such as:
  • Equity: Tokens representing ownership shares in a company.
  • Debt: Tokens representing loans or bonds, entitling holders to interest payments.
  • Investment Funds: Tokens representing shares in collective investment schemes.
  • Revenue Share Tokens: Tokens entitling holders to a portion of the profits or revenues generated by a project or company.
• Most ICO Tokens: If an Initial Coin Offering (ICO) involves the sale of tokens with the expectation of future profits or appreciation, and the success depends on the efforts of the project team, it is almost certainly considered a public offering of financial securities.
• Tokens Used for Speculation: If the primary purpose and marketing of a token emphasize its potential for capital gains rather than its utility within a specific network or service, it leans towards being classified as a security.

Tokens NOT typically considered securities (unless their marketing or function changes):

• Utility Tokens (Pure): If a token provides genuine access to a product or service within a network and has no inherent investment expectation or profit-sharing mechanism (e.g., tokens used solely to pay for computing power, storage, or transaction fees). However, if these are sold with a promise of future appreciation, they can be reclassified.
• Payment Tokens (Pure): Cryptocurrencies designed solely as a medium of exchange and not linked to an underlying enterprise promising returns (e.g., Bitcoin, stablecoins). These are generally outside the scope of securities regulation but may fall under monetary or payment system regulations (BCEAO).

3. Registration/Exemption Requirements for Token Issuers

If a token is classified as a financial security and its issuance constitutes a "public offering," the issuer must comply with the existing UEMOA financial market regulations, which include:

• Prior Authorization from CREPMF: Any public offering of financial securities requires explicit authorization from CREPMF before the offer is made.
• Prospectus Requirements: The issuer must prepare and submit a detailed prospectus (note d'information) for CREPMF approval. This prospectus must contain all necessary information for investors to make an informed decision, including:
  • Detailed information about the issuer and the project.
  • Rights and obligations associated with the token.
  • Risks involved in the investment.
  • Use of proceeds.
  • Financial statements.
• Disclosure and Transparency: Ongoing disclosure requirements may apply to ensure continuous information for investors.
• Intermediary Involvement: The issuance may require the involvement of authorized financial intermediaries (e.g., investment banks, brokerage firms) approved by CREPMF.

Exemptions: While the regulations allow for private placements (offerings not considered "public"), the threshold for what constitutes a public offering in the UEMOA context is generally broad, emphasizing investor protection. It's difficult to issue tokens to a large number of investors without triggering public offering requirements. Small-scale, private offerings to a limited number of qualified investors might be exempt, but this needs careful legal assessment.

4. Secondary Trading Rules

If a token is classified as a financial security, its secondary trading is subject to the same rules as other financial securities in the UEMOA market:

• Regulated Market Trading: Secondary trading of security tokens must generally occur on a regulated market, such as the Bourse Régionale des Valeurs Mobilières (BRVM), the regional stock exchange for UEMOA. This would imply meeting BRVM listing requirements.
• Authorized Intermediaries: Trading must be conducted through licensed stockbrokers and financial intermediaries authorized by CREPMF.
• Market Integrity Rules: Rules against market manipulation, insider trading, and other abusive practices would apply, supervised by CREPMF.
• Transparency: Trading data and prices might be subject to reporting requirements.

Unregulated platforms for trading tokens classified as securities would be considered non-compliant and potentially illegal.

5. Enforcement Examples

Specific, widely publicized enforcement actions related to cryptocurrency security classification within Senegal or the broader UEMOA region are not frequently detailed in public reports, unlike in more developed markets. However, CREPMF's approach is characterized by:

• Preventative Warnings: CREPMF (and BCEAO) has consistently issued warnings to the public about the risks associated with investing in unregulated cryptocurrencies and ICOs. Communication N° 001/2019 serves as a clear statement of regulatory intent and a warning against unauthorized offerings.
• Monitoring and Intervention: It is understood that CREPMF actively monitors the market for activities that may fall under its jurisdiction. Should an entity undertake an unauthorized public offering of security tokens, CREPMF has the power to:
  • Issue cease-and-desist orders.
  • Impose fines and administrative penalties as per Regulation N° 02/2009/CM/UEMOA.
  • Refer cases to judicial authorities for criminal prosecution in instances of fraud or serious violations.
  • Prohibit the marketing of specific unregulated products.

The absence of highly publicized "crypto crackdowns" does not indicate a lack of regulation, but rather that the framework is in place to either deter non-compliance through clear guidance or address issues through less public administrative means or by referring them to national judicial systems. The primary focus remains investor protection and market integrity.

Specific Legislation and Regulatory Guidance URLs:

1. CREPMF Communication N° 001/2019/PR/CREPMF du 15 février 2019 (relative aux opérations de levée de fonds par le biais de cryptomonnaies ou d’actifs numériques – Initial Coin Offering – ICO):

   • URL: [Often found on the CREPMF official website under "Communications" or "Actualités"] A direct link to the PDF can be found via search. As of my last update, accessing specific old communications directly via a stable URL on the CREPMF site can be tricky due to site redesigns, but it is publicly available.
   • Try searching for: "CREPMF Communication N° 001/2019" on the CREPMF website or a general search engine.

2. Règlement N° 02/2009/CM/UEMOA relatif à l'organisation du marché financier régional de l'UEMOA:

   • URL: This foundational regulation is generally available on the UEMOA Commission's website or CREPMF's legal texts section.
   • CREPMF Official Website: http://www.crepmf.org/ (Look under "Textes Règlementaires" or "Publications")

3. BCEAO Official Website: (for general monetary policy statements and warnings regarding cryptocurrencies as legal tender)

   • URL: https://www.bceao.int/ (Look under "Actualités" or "Publications")

It is crucial for any entity considering an ICO or token issuance targeting UEMOA residents to seek specialized legal advice to ensure compliance with these regulations.