On-shore VASP in Yemen

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

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.

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.

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.

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.

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:

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.

Central Bank of Yemen (Sana'a Branch): In 2018-2019, the CBY in Sana'a reportedly issued warnings against dealing with cryptocurrencies, deeming them illegal and speculative.

Central Bank of Yemen (Aden Branch): Similarly, the CBY in Aden has also warned against cryptocurrencies.

Prohibitive Stance: When an activity is prohibited, there's less incentive to publish detailed regulatory frameworks for it; rather, the focus is on blanket warnings or bans.

Overall Status: The Central Bank of Yemen (CBY), specifically the internationally recognized government based in Aden, has prohibited dealing in cryptocurrencies. This means that the concept of VASPs operating legally and implementing the Travel Rule does not currently apply in a recognized capacity.

No, the FATF Travel Rule has not been adopted in Yemen. The fundamental prerequisite for the Travel Rule (i.e., regulated virtual asset service providers or VASPs) does not exist due to the prohibition of cryptocurrencies.

However, individuals or entities found to be dealing in cryptocurrencies would be subject to penalties under the general financial laws and regulations that prohibit such activities, as issued by the Central Bank of Yemen. These penalties could include fines, asset seizure, and other legal consequences for violating financial prohibitions, potentially falling under anti-money laundering (AML) or financial stability regulations that broadly target unauthorized financial activities.

Central Bank of Yemen (Aden-based) Prohibition: The Central Bank of Yemen (CBY) has issued warnings and prohibitions against dealing with cryptocurrencies. For example, in January 2022, the CBY issued a warning against dealing with virtual currencies, citing their instability and use in illegal activities. Similar warnings were issued in 2021. While specific official URLs for these decrees can be challenging to find reliably and consistently in English due to the ongoing conflict and local language barriers, these prohibitions are widely reported by regional financial news outlets.