Custodian of Digital Assets & Digital Asset Marketplace Licence
With the objective of further developing the Financial Services sector of Mauritius, the FSC has implemented a licencing framework for the custody of digital assets
Mauritius is the first jurisdiction to issue Digital Assets Custody Service Licences as from March 2019.
In 17th September 2018, Mauritius recognised Digital Assets as an asset-class for investment by Sophisticated and Expert Investors, Expert Funds and Specialised Collective Investment Schemes – through the guidance notes of the Financial Services Commission (FSC). In March, the commission set out the regulatory framework relating to the custody of digital assets, effective as from 1st March 2019. With the Custodian Services (Digital Asset) Licence, the Mauritius International Financial Centre (IFC) becomes the first jurisdiction to provide a regulated environment for the custody of digital assets. What are the important rules applicable to those who wish to carry out custody services for digital assets?
With the objective of further developing the financial services sector of Mauritius, the FSC has implemented a licencing framework for the custody of digital assets. Following consultations with the Organisation for Economic Cooperation and Development (OECD), the FSC introduced the Custodian Services (Digital Asset) Licence, which grants the holder(s) with the licence to provide services for the safekeeping of Digital Assets.
What are Digital Assets?
In the context of the Financial Services (Custodian services (digital asset)) Rules 2019, the FSC defines a Digital Asset as:
- any token, in electronic or binary form, which represents either the holder’s access rights to a service or ownership of an asset;
- a digital representation of value which:
- is used as a medium of exchange, unit of account, or store of value but which is not a legal tender, even if it is denominated in legal tender;
- constitutes assets such as debt or equity; or
- provides access to a blockchain-based application, service or product.
The FSC’s definition of a Digital Asset however excludes:
- any transaction in which a business grants value which cannot be exchanged for legal tender, bank credit or any digital asset, as part of an affinity or reward programme; or
- the use of Digital Assets within an online gaming platform.
What are the rules you should abide by as a holder of a Custodian Services (Digital Asset) Licence?
To be authorised to provide custody services for digital assets in Mauritius, a person or company should apply for the Custodian Services (Digital Asset) Licence in accordance with Part IV of the Act. Under this Licence, the holder needs to respect the requirements, as set out in the Financial Services (Custodian services (digital asset)) Rules 2019, to be able to operate lawfully. You can access the complete set of rules here.
In addition, the holder of a Custodian Services (Digital Asset) Licence – as a financial institution, should also comply with all laws and regulations in force relating to Anti-Money Laundering and Combatting the Financing of Terrorism (AML/CFT) in Mauritius, and the FSC Code on the Prevention of Money Laundering and Terrorist Financing.
Regulation is good for businesses using Digital Assets
The Custodian Services (Digital Asset) Licence in Mauritius, and other international regulations, show the positive progress the crypto economy is witnessing. Implementing and strengthening regulatory compliance (through rigorous IT security, asset protection, improved transparency and market surveillance), is a significant step to the democratisation of digital assets exchanges and the access to new pools of local, regional and international capital. Through the implementation of best practices, in consultation with international organisations such as the OECD, are expected to broaden the scope of digital exchanges. It has the capacity to attract interest from the institutional investors and retail investors.
Mauritius: the first jurisdiction in the world to offer a regulated framework for the custody of Digital Assets
Mauritius is an IFC of repute and substance. Indeed, the island nation ranks first among African countries on international indices, including ICT development, good governance, ease of doing business, political and social stability, and economic freedom amongst others. With the digitisation of assets and transactions, Mauritius has set its sight on becoming a FinTech hub. It therefore established, in February 2018, the Fintech and Innovation-driven Financial Services Regulatory Committee to help in designing an appropriate regulatory framework to encourage and support the advancement of FinTech in Mauritius.
The FinTech sector will undeniably contribute to the growth of the Mauritius IFC. It provides the opportunity to offer value-added and innovative services, and enhances the attractiveness and competitiveness of the IFC for such activities. Being the first jurisdiction in the world to issue a Custodian Services (Digital Asset) Licence, Mauritius affirms its position as a FinTech hub in and for Africa.
In a statement, the Honorable Pravind Jugnauth, Prime Minister of the Republic of Mauritius said that Mauritius is committee to fast-tracking “the country’s move to an age of digitally-enabled economic growth”. This has started with the modernisation of the FinTech environment with the Financial Services (Custodian services (digital asset)) Rules 2019 framework. Being part of Africa, Mauritius is looking “forward to fostering further innovation and bringing more prosperity to the region”, he added.