On March 1, 2019, Mauritius became one of the first African regions to issue a license to crypto custody providers following a press release by the country’s Financial Services Commission (FSC) today, Friday.
That new development means that companies that store cryptocurrencies for citizens will be mandated to acquire a license from the FSC and also meet up with other requirements specified by the watchdog.
In this article, we review the simple steps taken by Mauritius to regulate an emerging industry that has proven difficult to handle for even the world’s most powerful nations.
The Timeline For Crypto Regulation in Mauritius
It is interesting to note that it was barely six months ago that Mauritius recognized cryptocurrency as a new asset class for sophisticated and expert investors.
In the document about the new status, the Mauritian FSC defined cryptocurrencies as a digital representation of value and included the three primary use of cryptocurrencies, namely as (security, utility or means of exchange).
Although the paper acknowledged that cryptocurrencies would not have a legal tender status, it allowed citizens to own and transact it.
Following the recognition cryptocurrencies as a new asset class, the watchdog published a consultation paper on Nov 5 defining specific conditions that must be met by any entity offering crypto custody or exchange services within its jurisdiction.
Key Requirements For Crypto Custodians In Mauritius (Adapted From Consultation Paper)
Custodians will at all times have and maintain a minimum stated unimpaired capital of not less than MUR 500,000 ($14500) or such higher amount as the FSC may determine.
Individuals will not provide crypto custody services. Instead, only a recognized entity such as a registered company in the country can.
A detailed report containing an in-depth assessment of the potential money laundering and terrorist financing (“ML/TF”) risks posed by a company’s operations as well as the measures, systems, controls, and protocols which will help them mitigate these ML/TF risks.
A valid document showing that they secured insurance for the crypto assets in custody.
Disclosure of third-party services used to carry out crypto custody operations.
An updated list of personnel having access to private keys and seeds to be disclosed to the FSC.
Crypto custodians managing assets less than $30 million will receive a Qualified license while those above that threshold will receive the Full Custodian Services License after six months of operation.
Stakeholders and industry participants were called upon to contribute to the consultation paper between the date it was issued and November 30, 2018.
Following the expiration of the grace period for public comments on the consultation, the latest release by the Mauritius FSC means that the African country has arguably become the first African nation to regulate nearly all significant facets of the cryptocurrency industry.
The FSC said in the release that it held discussions with the Organisation for Economic Cooperation and Development (OECD), to come up with its regulatory framework and hope that it will help their quest to become a “Fintech Hub” in an for Africa.
The new rules puts security tokens in the same class as traditional securities and required that projects apply for a license before conducting a token sale. To guarantee investor protection, projects were also asked to disclose any risks involved in a clear way before issuing the tokens.
While it is true that the emerging nature of the crypto industry means that Mauritius will make adjustments to its regulatory efforts at some point, the nation has already done a more significant part of the job and will not be found wanting when that time comes.
Other African countries such as Ghana and South Africa who are already considering crypto regulation could borrow a leaf from how Mauritius has achieved the feat. If they do this, then it will improve the state of crypto regulation in Africa and allow the region to become more active in an industry that promises to revamp financial systems.