Since 2017, the Government of Mauritius has demonstrated its interest and commitment to accelerating the country's move to an age of digitally-enabled economic growth, namely by creating new opportunities for private investment and job creation.
In particular, through its FinTech Committee, the Government has identified three priority areas within the technology space for regulation in Mauritius. These include:
- Initial Token Offerings (ITOs);
- Custody services in relation to Digital Assets; and
- Investing and Trading in Digital Assets.
Investments in Digital Assets
The Financial Services Commission (FSC) has issued a guidance note on the recognition of digital assets as an asset-class for investment by sophisticated investors. The note highlights the following;
- Cryptocurrencies, unlike fiat currencies, are not legal tender in Mauritius. Nonetheless, the FSC acknowledges that, albeit reliant upon market demand and supply, Cryptocurrencies have "value" since they are exchangeable for other things having value, thereby showing characteristics akin to physical commodities such as grain or precious metals.
- The FSC considers as a Digital Asset, any token, in electronic/binary form, which is representative of either the holder's access rights to a service or ownership of an asset. The FSC considers Cryptocurrencies as being a sub-category of Digital Assets.
- Investments in Cryptocurrencies tend
to be of a high-risk nature. However, the FSC recognises that
Digital Assets including Cryptocurrencies may constitute an
asset-class for investment by the following:
- Sophisticated investors;
- Expert Investors;
- Expert Funds;
- Specialised Collective Investment Schemes; and
- Professional Collective Investment Schemes.The above-mentioned terms are defined in the Securities Act or in the Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008.
- Given the high-risk nature of investments in Digital Assets and Cryptocurrencies, the FSC considers that they may not be suitable for investment by retail investors. The FSC thus urges all prospective investors to fully ascertain the related risks prior to committing any funds for investment in Digital Assets and Cryptocurrencies. In addition, the FSC hereby informs the public and other investors that any investment in Digital Assets and Cryptocurrencies is at their own risks and that they are not protected by any statutory compensation arrangements in Mauritius.
New Licencing Regime for custodians of digital assets
From 1 March 2019 a new licencing regime for custodians of digital assets will be introduced by the FSC.
In assessing the capacity of an entity to provide custody services for Digital Assets, the approach contemplated by the FSC will focus on three core areas for this activity, namely:
- Operational and Governance Protocols – The policies and protocols as well as operational risk management, including fraud prevention, in relation to the custody of Digital Assets;
- Safekeeping of Digital Assets – The generation and securing of seeds and keys as well as management of addresses and wallets relating to Digital Assets. This area also extends to recovery processes regarding seeds and keys which have either been corrupted or otherwise compromised;
- Transaction Management – The procedures for the facilitation of incoming and outgoing transactions in relation to a Digital Asset being held in custody to ensure that appropriate Know Your Client (KYC) and Customer Due Diligence (CDD) measures are applied prior to any transactions being authorised.
Regulatory Sandbox Licences
The Economic Development Board (body created following the merger between the Board of Investment, Enterprise Mauritius and the Financial Services Promotion Agency) continues to issue regulatory sandbox licences to eligible companies willing to invest in innovative projects according to an agreed set of terms and conditions for a defined period. In January 2019, five licences have been granted.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.