The Virtual Asset and Initial Token Offerings Services Bill was passed by the National Assembly of Mauritius on 10 December 2021 which is now known as The Virtual Asset and Initial Token Offerings Services Act 2021 (the “Act”).
The Act which is yet to be proclaimed before coming into force, will regulate the new and developing business activities surrounding Virtual Assets (VAs) and Initial Token Offerings (ITO) and makes provisions for inter alia, managing, mitigating, and preventing money laundering, financing of terrorism and proliferation risks associated with VA and ITO Services.
What are VAs and ITOs?
VAs are digital representation of value that may be digitally traded or transferred and used for payment or investment purposes, but exclude digital representation of fiat currencies, securities and other financial assets as defined under the Securities Act 2005.
ITOs are offers for sale to public, by an issuer of a virtual token (VT) in exchange for fiat currency or another VA. VTs are a cryptographically secured digital representation of a set of rights, including smart contracts, provided on a digital platform.
Who are VASPs?
Virtual Asset Service Providers (VASPs) conduct exchanges between VAs and fiat currencies, and one or more forms of VA. They also transfer VAs, administer and safeguard VAs and instrument enabling control over them, and facilitate their offer and sale.
What will be the role of the Financial Services Commission?
The Financial Services Commission (FSC) will be empowered to regulate and supervise VASPs and issuers of ITOs. FSC will:
◼ License VASPs
◼ Register Issuer of ITOs (IITOs)
◼ Determine whether VASPs and IITOs are complying with their AML/CFT regime
◼ Monitor and oversee the business activities of the VASPs and IITOs and issue guidance
on the detection of suspicious transactions and the application of AML/CFT measures
◼ Carry onsite inspection into business activities of the VASPs and IITOs to ascertain whether they are complying with the legislation and the conditions of their licence and
registration
◼ Collaborate with the Bank of Mauritius in ensuring the soundness and stability of the
financial system in Mauritius.
What will VASPs required to do?
VASPs will be required to ensure that the systems and controls applied to their business activities are adequate and appropriate for the scale and nature of such business activities including systems and controls which should address the following:
◼ Recording, storing, protecting and transmitting information
◼ Effecting and monitoring transactions
◼ Operation of measures taken for securing the timely discharge of the rights and liabilities
of parties to transactions
◼ Safeguarding and administering assets belonging to investors
◼ Business continuity and planning in the event of disruption
VASPs that hold Class S licences (Virtual Asset Market Place (VAMP)) are required to ensure that the systems and controls cover, in respect of the VAMP:
◼ Identification and detection of suspicious price spikes or anomalies
◼ Prevention and monitoring of abusive trading strategies
◼ Immediate steps for the restriction or suspension of trading upon discovery of market
manipulative or abusive trading activities, including the temporary freezing of accounts
VASPs will have to ensure proper safeguarding and protection of assets belonging to investors and have proper systems and controls in place to prevent market abuse which shall be closely monitored by the FSC.
VAMPs can be centralised or decentralised virtual platforms, whether in Mauritius or in another jurisdiction, that facilitate the exchange of VAs for fiat currency or other VAs on behalf of third parties. VAMPs hold custody or control over VAs on behalf of their clients, to facilitate exchanges
or purchase VAs from sellers when transactions or bids and offers are matched in order to sell them to buyers.
What will IITOs be required to do?
IITOs will provide full and accurate disclosure of information which would allow potential purchasers to make informed decisions and will display a copy of this paper on their website, allowing maximum transparency.
If the IITOs publish a material misrepresentation relating to any matters specified in the Fourth Schedule of the Act, purchasers will have a right of action against them for the rescission of the subscription or damagers.
Matters stipulated in the Fourth Schedule:
◼ Rights, conditions or functions attached to the VT (Virtual Token), including any specific rights attributed to a token holder
◼ Any applicable taxes and soft/hard cap for the offerings
◼ Description of the anti-money laundering procedures of the IITO
To note that the Financial Intelligence and Anti-Money Laundering Act 2002 (FIAMLA) is being amended so that VASPs and IITOs shall hereinafter be categorised as financial institutions which, will by virtue of their status as financial institutions, compel them to be fully compliant with AML/CFT obligations.
The Act provides a comprehensive legislative framework that is aligned with international standards and best practices, for the benefit of prospective VASPs and IITOs to organise their business activities in or out of Mauritius.
