The Virtual Asset & Initial Token Offering Services Act 2021 was passed into law by the National Assembly on 10 December and will come into force when Presidential assent is received. The draft legislation was opened for industry consultation with final inputs submitted by 23 July and approved by the Cabinet at its meeting on 26 November.
The object of the Act is to provide a comprehensive legislative framework to regulate the new and developing business activities of virtual assets and initial token offerings. This framework is required to meet international Financial Action Task Force standards in respect of provisions for managing, mitigating and preventing any anti-money laundering and countering the financing of terrorism (AML/CFT) risks associated with these emerging business practices.
Under the Act, the Financial Services Commission (FSC) is to be responsible for regulating and supervising virtual asset service providers and issuers of initial token offerings. The Act therefore provides for the FSC, amongst other things, to:
- License virtual asset service providers.
- Register issuers of initial token offerings.
- Determine whether virtual asset service providers and issuers of initial token offerings are, for AML/CFT purposes, complying with the Financial Intelligence and Anti-Money Laundering Act, the Financial Services Act and the United Nations (Financial Prohibition, Arms Embargo and Travel Ban) Act 2019.
In addition, with a view to protecting the rights of clients of virtual assets and virtual tokens, and to ensure AML/CFT compliance, it will be a financial crime offence to:
- Carry out business activities as a virtual asset service provider without being correctly licensed.
- Carry out business activities as an issuer of initial token offerings without being correctly registered.
- Otherwise, be in breach of this new regulatory regime.
The existing regulatory framework on digital assets was adopted in the form of guidelines and regulations, with its scope limited to custodian services and to digital assets, such as ‘securities’ and ‘security tokens’. The new Act no longer limits the regulatory framework to these areas but provides for the licensing and supervision of a much wider range of activities under a new comprehensive definition.
Key provisions in the Act include the new definition of a ‘virtual asset’, which was imported from the FATF guidelines, and the transitional provisions which provide that a ‘security’ under the Securities Act no longer includes a ‘virtual token’.
With a view to promoting innovation in the financial services sector, the government of Mauritius announced a raft of initiatives in the National Budget 2021-22, as follows:
- Firstly, the Bank of Mauritius (BoM) and the FSC will set-up open labs for banking and payment solutions.
- Secondly, a FinTech Innovation Hub will be created to foster entrepreneurship culture and a single desk will be set up to accept all FinTech related applications.
- Thirdly, the introduction of the new Securities Bill will also reinforce the legal structure of the FinTech sector, especially regarding tokens or virtual assets with underlying securities.
- Fourthly, new legislation for virtual assets will be enacted.
- Fifthly, the BoM will roll-out, on a pilot basis, a Central Bank Digital Currency, to be known as the Digital Rupee.
“The main benefit of the Virtual Asset & Initial Token Offering Services Act is to provide a clear and comprehensive basis for operators as FinTech develops in Mauritius, whilst aligning the Mauritius legal framework for regulating such class of assets, with international standards,” said Hafeez Toofail, Compliance Director at Sovereign Consulting Ltd.
“Combined with the proposed new Securities Bill and Securitisation Bill announced in the Government Budget Speech 2021/22, it will facilitate the trading of virtual assets in Mauritius and give a huge boost to the FinTech industry.”