Over the last few years, the banking and NBFI sectors in Mauritius have experienced enhanced development and innovation regarding the blending of technology and financial services. Fintech and the digital transformation of financial services are changing the way customers access financial products and services day by day.
FinTech is a dynamic segment at the node of the financial services and technology sectors where technology-focused start-ups and new market entrants innovate the products and services currently provided by the traditional financial services industry. On the other hand, Virtual Asset Service Providers continue to disrupt and are eyeing opportunities to scale up and institutionalize within the financial services landscape, where the real potential lies for growth.
The digital assets legal framework has been updated and Mauritius is now leading the way in this part of the world. The Mauritius Financial Services Commission (FSC) has issued guidelines regarding the recognitions of virtual assets, which are segregated into two categories, namely:
Access token
Securities token (with the same definition as securities under the Securities Act 2005.
Hybrid token
This is further defined by the regulator under the Fintech series guidance notes
Definition of Security Token
“Security Tokens” are “securities” as defined in the Securities Act, represented in digital format.
By way of illustration, a Security Token may constitute:
- a share, where it confers or represents ownership or economic rights of the holder of the security token in a corporation;
- a debenture, where it constitutes or evidences the indebtedness of the issuer of the Security Token in respect of any money lent to the issuer by a holder of the Security Token; a derivative, whether on securities or commodities; or
- a unit in a collective investment scheme (“CIS”), where it represents a right or interest in a CIS including an option to acquire a right or interest in a CIS
The securities regulations have also been introduced to allow for specialized funds to invest into crypto or virtual assets, which may also include NFTs.
Digital Assets and Cryptocurrencies as an asset-class
Since transactions in Cryptocurrencies are unregulated and their prices are extremely volatile in their exchange rates to fiat money, investments in Cryptocurrencies tend to be of a high-risk nature.
The FSC considers a “token”, commonly referred to as a “coin”, as an electronic/digital representation of access rights to a service or ownership rights of an asset.
The FSC, nonetheless, recognises that Digital Assets including Cryptocurrencies may constitute an asset-class for investment by the following:
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- Sophisticated investors;
- Expert Investors;
- Expert Funds;
- Specialised Collective Investment Schemes and
- Professional Collective Investment Schemes
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A new piece of legislation has also been introduced to regulate Initial Token Offerings (ITO). The Virtual Asset and Initial Token Offering Services Act 2021 (the “Act”) came into force on the 7th of February 2022 Therefore, the activity of ITO does fall under the purview of the Mauritian NBFI regulator. An ITO can be carried out in Mauritius with the issuer properly licensed by the FSC.
Furthermore, there are also openings for tech companies to engage into digital custody activity. It allows for the licensee to act as custodian for digital assets.
At Ashton Financial Partners Ltd (Ashton), corporations and experts are working in collaboration to handle Digital Assets Custody and FinTech services. Lately, we have worked jointly with IBM Boston’s Chief Technical Officer to explore some new FinTech projects. We are always pushing the boundaries for new services and have had high-level work sessions with the FSC team to examine a Digital Assets Custody project.
Over and above Digital Assets Custody and FinTech services, Ashton is also well positioned to provide springboard Investment Bank services.
We have the required expertise to help set up an Investment Bank, which allows the licensee to offer corporate finance, asset management, investment advisory and securities services. The advantages are that there are tax concessions with regards to those who invest through those vehicles.
Payment Intermediary Services is another license that we have the experience to advise on. The PIS licence allows for operation of e-wallets and act as payment service provider, which is becoming an important part in the FX and CFD broker landscape due to rising banking costs.
We have successfully obtained such licences for our clients and we pride ourselves to be the first management company in Mauritius to have successfully completed the application for a Multi-Family office licence.
Digital Banking and Private Banking including Regulatory Sandbox licences are the areas where we advise our clients comfortably.
We believe the way we have been operating over the past few years has given us a first mover advantage to excel into the FinTech segment; which is why we give much importance to our talented members at Ashton to have regular access to specialised trainings so as to always be on the top of new regulatory developments as we do not believe in handling back office tasks for our clients but more in adding value to their operations in an innovative way.