Yemen -- Securities Classification Regulatory Overview

Yemen currently operates under extremely challenging conditions due to ongoing conflict and a divided governance structure, which significantly impacts its regulatory environment, especially concerning complex and emerging technologies like cryptocurrency.

Crucially, Yemen does not have a developed, unified, or enforceable legal framework for classifying cryptocurrency tokens as securities, nor an equivalent to the Howey Test. Instead, the prevailing stance from the authorities that exercise control over different parts of the country is either an outright ban on cryptocurrency or strong warnings against its use due to financial stability concerns.

Here's a breakdown based on the two primary central banking authorities:

1. Sanaa-based Central Bank of Yemen (Houthi-controlled)

The Central Bank of Yemen in Sanaa, controlled by the Houthi movement, has adopted an outright ban on cryptocurrency trading and use.

• 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:
    • News Report on the Ban:
      • 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)
      • Note: This article confirms the Sanaa CBY's directive "prohibiting trading in cryptocurrencies, dealing in them, or promoting them."

2. Aden-based Central Bank of Yemen (Internationally Recognized)

The internationally recognized Central Bank of Yemen, operating from Aden, has not issued an explicit, blanket ban on cryptocurrency similar to the Sanaa-based authority. However, it maintains a cautious stance and has issued strong warnings against unauthorized financial transactions, currency speculation, and any activities that bypass official banking channels or undermine the stability of the Yemeni Rial.

• 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.
• Registration/Exemption Requirements for Token Issuers: There are no specific requirements for token issuers. Any financial services provider must be licensed by the CBY (Aden), and it is highly unlikely that licenses would be granted for crypto-related services given the current environment.
• 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.
• Specific Legislation and Regulatory Guidance URLs:
  • 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):
    • URL: http://www.cby-ye.com/
    • 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.

Conclusion

In summary, due to the severe political and economic fragmentation and ongoing conflict, Yemen lacks any established framework for classifying cryptocurrency tokens as securities. The regulatory landscape is characterized by either an outright ban (Sanaa) or a highly restrictive, cautionary approach focused on financial stability and combating illicit transactions (Aden), neither of which includes specific securities legislation for digital assets. For practical purposes, conducting any cryptocurrency-related activities in Yemen carries significant legal and financial risks, with a complete prohibition in areas controlled by Sanaa authorities.