Yemen

Yemen does not have dedicated laws or regulations specifically addressing virtual assets, cryptocurrencies, or Virtual Asset Service Providers (VASPs).

The focus of the existing financial regulatory bodies (the two CBYs) is primarily on traditional banking, foreign exchange, and general financial stability, often under challenging circumstances.

The use of cryptocurrencies in Yemen is often discussed in the context of remittances, circumventing sanctions, or as an alternative store of value, rather than a regulated financial activity.

**None Specific for Virtual Assets.**

In the absence of specific crypto regulations, any entity attempting to operate a cryptocurrency exchange, provide custody services, or process payments using virtual assets would fall into a **grey area** of legality or risk being interpreted under existing, broader financial laws, or even being outright prohibited.

**Potential Interpretation under Existing Laws (Highly Speculative):**

**Exchanges:** Could potentially be viewed as operating an unlicensed money service business (MSB), money changer, or even an unregulated financial institution by either CBY, which would typically require specific licenses for foreign exchange and money transfers.

**Custody Providers:** Might be interpreted as holding funds or assets on behalf of others, which in a traditional context could require a banking or trust license.

**Payment Processors:** Could be viewed as an unauthorized payment service provider or a money transmitter.

**De Facto Prohibition/High Risk:** Without a clear legal framework, engaging in such activities carries significant legal risk, including potential penalties for operating an unlicensed financial service, confiscation of assets, or criminal charges, depending on how authorities might interpret activities. It is more likely to be viewed with suspicion than to be regulated.

Given the absence of a specific framework, there is **no distinction** between a registration and a licensing regime for virtual assets in Yemen. Neither exists.

**No specific requirements for virtual assets.**

**Capital:** In a hypothetical future scenario where crypto is regulated, capital requirements would likely be introduced, drawing from international banking and financial services norms.

**AML/KYC (Anti-Money Laundering/Know Your Customer):** Yemen has general AML/CFT (Combating the Financing of Terrorism) laws, even if their enforcement is challenging and fragmented.

While these laws do not explicitly mention virtual assets, any financial activity, especially those involving cross-border transactions, would ideally be subject to general AML/CFT principles to comply with international standards set by bodies like the Financial Action Task Force (FATF).

Operating without explicit AML/KYC protocols would be a significant red flag and expose operators to severe legal and reputational risks.

**Local Presence:** If a licensing regime were to be established, a local presence (e.g., registered entity, physical office, local management) would almost certainly be a requirement, as is common for financial services firms in most jurisdictions.

**N/A.** There is no application process for virtual asset licenses, as such licenses do not exist.

**Central Bank of Yemen (Aden Branch/Internationally Recognized):**

**Website:** Finding a consistently active and up-to-date official website for the internationally recognized CBY in Aden can be challenging due to the conflict. Historically, domains related to the CBY (like cby.gov.ye) might have pointed to different authorities at different times.

**General Reference:** You would typically look for official pronouncements or laws issued by the recognized government in Aden. However, specific official online portals for financial regulations are often inaccessible or outdated.

*Self-correction: A direct, stable, and comprehensive English-language portal for Yemeni legislation, particularly from Aden, is not readily available or consistently maintained.* The focus should be on the *institution* rather than a specific URL for crypto.

**Central Bank of Yemen (Sana'a Branch/Houthi-Controlled):**

**Website:** Similarly, finding a stable and comprehensive official website for the CBY in Sana'a with detailed regulatory texts in English is difficult.

**General Reference:** This branch issues its own directives and regulations applicable to areas under its control.

*Self-correction: Same as above. The institutional existence is more important than a direct, stable URL for crypto laws, as none exist.*

Yemen has AML/CFT laws (e.g., Law No. 1 of 2010 on Combating Money Laundering and Terrorism Financing), but these predate the widespread emergence of virtual assets and do not explicitly cover them.

Finding an official, current, and accessible English translation of these specific laws online from a government source is often problematic.

**FATF (Financial Action Task Force):** Yemen is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a FATF-style regional body. While this doesn't provide specific Yemeni laws, it highlights the international standards Yemen is *expected* to adhere to for AML/CFT, which now include virtual assets.

**FATF Recommendations:** https://www.fatf-gafi.org/recommendations/html/fatf-recommendations.html (These recommendations include explicit guidance on virtual assets and VASPs, which any future Yemeni regulation would likely draw upon).

**Legal Uncertainty:** The primary risk is the complete absence of a legal framework, meaning any operation could be deemed illegal at any time.

**Fragmented Governance:** Dealing with two competing central banks and authorities creates immense operational and legal complexity. Approvals from one might not be recognized by the other, or could even be viewed as illicit.

**Sanctions:** Yemen is subject to various international sanctions regimes. Engaging in financial activities, especially those involving digital assets, could inadvertently lead to violations for international partners.

**Security & Stability:** The ongoing conflict makes any form of business operation highly risky in terms of physical security, infrastructure, and financial stability.

**Currency Controls:** Both CBYs impose strict currency controls, which could be extended to virtual assets if they gain wider adoption.

**Consumer Protection:** There would be virtually no regulatory recourse for consumers or businesses in case of fraud, theft, or operational failures.

**Legal Test (e.g., Howey equivalent):** No such test exists or is applied. The classification of crypto as a "security" is moot because all cryptocurrency-related activities are prohibited.

**Which tokens are considered securities:** None are officially classified as securities because the entire asset class is banned.

**Registration/Exemption Requirements for Token Issuers:** No such requirements exist. Issuing or dealing in any cryptocurrency is illegal.

**Secondary Trading Rules:** No specific rules for secondary trading exist beyond the general ban on all crypto activities.

**Enforcement Examples:** The Sanaa-based authorities have actively enforced this ban. There have been reports of arrests, asset seizures, and prosecution of individuals involved in cryptocurrency trading or related activities, often under broader charges related to illegal financial operations, money laundering, or undermining national currency stability.

**Example:** In 2021, the Sanaa-based CBY issued a circular explicitly prohibiting trading, dealing, and promotional activities related to cryptocurrencies, warning that violators would be subject to legal prosecution.

**Specific Legislation and Regulatory Guidance URLs:**

Direct links to the original Arabic circulars are often difficult to obtain or are unstable due to the conflict. However, the ban was widely reported:

*Source:* The Arab Weekly (citing Yemeni state news agency SABA controlled by Sanaa)

*URL:* https://thearabweekly.com/yemen-central-bank-bans-trading-cryptocurrencies-financial-speculation (Published May 14, 2021)

**Legal Test (e.g., Howey equivalent):** No specific legal test for classifying crypto as securities exists or has been promulgated by the Aden-based CBY or other relevant authorities.

**Which tokens are considered securities:** No specific tokens are classified as securities. The focus is more on the *activity* of using crypto for unauthorized financial transfers or currency speculation rather than the *nature* of the digital asset itself as a security.

**Secondary Trading Rules:** No specific rules exist. Any financial trading activity that falls outside the regulated financial sector is discouraged or prohibited.

**Enforcement Examples:** Enforcement by the Aden authorities tends to focus on individuals or entities involved in unlicensed money transfer operations (hawala), currency manipulation, or financial schemes that exploit public trust. While not directly aimed at "securities law" for crypto, using crypto for such activities would likely fall under existing laws pertaining to unauthorized financial services or currency violations.

The Aden-based CBY's general policy is to regulate and monitor all financial transactions within the country to ensure stability and combat illicit finance. While there may not be specific circulars for crypto as securities, their general warnings about unauthorized financial services and currency speculation would apply.

**Central Bank of Yemen (Aden) Official Website (Arabic):**

*Note:* Information on this site is primarily in Arabic. While specific crypto guidance may not be easily found, general announcements regarding financial stability, monetary policy, and warnings against unauthorized financial activities would be relevant. Users would need to navigate the site for general financial directives.

**Law No. 1 of 2010 on Combating Money Laundering and Terrorism Financing:** This is the primary AML/CFT law in Yemen. It establishes the legal framework for identifying, freezing, and confiscating illicit funds, and mandates reporting obligations for financial institutions.

**Central Bank of Yemen Regulations:** The CBY issues various regulations and instructions to financial institutions (banks, money exchangers, insurance companies) regarding the implementation of the AML/CFT law. These would cover traditional financial services.

**Identification and Verification:** Obtaining and verifying the identity of customers (individuals and legal entities) using reliable, independent source documents, data, or information. This includes name, address, date of birth/incorporation, nationality, identification numbers.

**Beneficial Ownership:** Identifying and verifying the beneficial owner(s) of legal entities.

**Purpose and Nature of Business Relationship:** Understanding the purpose and intended nature of the business relationship or occasional transaction.

**Ongoing Monitoring:** Conducting ongoing due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions are consistent with the obliged entity's knowledge of the customer, their business, and risk profile.

**Enhanced Due Diligence (EDD):** For higher-risk customers, politically exposed persons (PEPs), or complex transactions, more rigorous checks would be required. Given the illegal status of crypto, any involvement would inherently be high-risk.

**Obligation to Report:** Financial institutions and designated non-financial businesses and professions (DNFBPs) are legally obliged to report any suspicious transactions or activities to the Financial Information Unit (FIU).

**Definition of Suspicious Transaction:** Any transaction that gives rise to a suspicion of money laundering or terrorism financing, regardless of the amount.

**Virtual Assets:** Given the outright ban, any transaction involving virtual assets would inherently be considered suspicious and a potential predicate offense under the AML/CFT law.

**Duration:** Financial institutions are required to maintain records of customer identification data, account files, business correspondence, and transaction data for a period of at least **five (5) years** after the business relationship has ended or the transaction has been completed.

**Accessibility:** Records must be maintained in a way that allows for rapid retrieval by competent authorities upon request.

**Central Bank of Yemen (CBY):** The CBY is the primary financial sector regulator and supervisor responsible for overseeing AML/CFT compliance of banks and other financial institutions. Due to the ongoing conflict, there are effectively two CBYs:

**Central Bank of Yemen (Aden-based):** This is the internationally recognized CBY and the one that issued the crypto ban.

**Central Bank of Yemen (Sana'a-based):** Operating in Houthi-controlled territory, it also issues financial directives.

**Financial Information Unit (FIU):** This unit is responsible for receiving, analyzing, and disseminating suspicious transaction reports (STRs) to law enforcement agencies. The FIU in Yemen operates under the umbrella of the government's financial oversight mechanisms.