Graham Patrick, Senior Client Service Manager in Mauritius, and Miro Metodiev, Client Service Manager in Luxembourg, outline the Mauritius government’s vision for this international finance centre to become a FinTech hub embracing blockchain and other disruptive technology. Maitland is well placed to assist companies wanting to take advantage of the opportunities.

In recent years, Mauritius has gained a growing global reputation as the preferred gateway for investment into (and out of) Africa. The Government of Mauritius has also recognised that the digital revolution presents an opportunity for smaller economies, like that of Mauritius, to leapfrog traditional industrial development. Accordingly, Mauritius is now looking to position itself as the FinTech hub for Africa.

Under the theme of “Pursuing our Transformative Journey”, the Mauritian Prime Minister and Minister of Finance and Economic Development, Hon. PK Jugnauth, recently announced in the 2018/2019 Budget Speech an intention to accelerate the country’s move to an age of digitisation. Innovation, in the form of Artificial Intelligence (AI) and FinTech (notably including blockchain), is being recognised as a means to increase private investment and employment in Mauritius.

As such, the Finance (Miscellaneous Provisions) Bill (No. XI of 2018) seeks to introduce two new licensable activities announced by the Hon. PK Jugnauth, namely:

  • The Custodian Services (Digital Asset) Licence; and
  • The Digital Asset Marketplace Licence

These new licences, once in effect, aim to provide a regulated environment for the safe custody of digital assets by investors and further enable the exchange of digital assets.

Blockchain is essentially defined as an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. Cryptocurrencies are digital assets designed to work as a medium of exchange using strong cryptography to secure financial transactions, control the creation of additional units and verify the transfer of assets. Blockchain is the technology behind most cryptocurrencies. Digital currency exchanges, on the other hand, act as a means of facilitating the exchange of cryptocurrency for alternative cryptocurrencies, or fiat currency.

Globally, there has been a significant increase in the interest in blockchain and digital assets – notably Bitcoin and other select cryptocurrencies. Whilst there are both proponents and sceptics of cryptocurrencies, the blockchain technology itself is widely regarded as disruptive with multiple beneficial use cases. In the financial sector, where fast, reliable and accurate record keeping is required, the potential is unmistakeable. Yet, the questions around “is it a currency?” and “is the hype a speculative bubble?” have certainly restricted wider adoption. Most jurisdictions lack legal and regulatory certainty around the treatment and recognition of digital assets to mitigate these concerns.

The introduction of licences in Mauritius for digital assets custodian services and a digital asset marketplace will, no doubt, reduce the uncertainty and be beneficial for a variety of international blockchain companies looking for a robust jurisdiction from which to operate.

Moving Mauritius on the FinTech journey

Recognising that, by its nature, disruptive technology usually requires “outside the box” thinking, Mauritius also provides for a Regulatory Sandbox Licence (RSL).

Initially announced in the 2016/2017 Budget Speech, the RSL aims to provide entrepreneurs with a means of conducting business activities for innovative projects for which there is no (or an inadequate) legal or regulatory framework. The RSL offers a “sandbox” space to test promising projects within set parameters which act as a temporary framework to, in essence, develop a working prototype. Following a testing period and upon demonstration of applicability, compliance and benefits of the project, permanent regulations can follow for the new industries and, in the process, establish new worldwide best practices.

To bolster this opportunity, Mauritius is now setting up a National Regulatory Sandbox Licence Committee to expand on the concept and consider all issues relating to RSLs, specifically for FinTech activities.

Challenges remain

Whilst FinTech is gaining in momentum, there are notable risks inherent in the nature of digital assets. To address some of these challenges, particularly cyber-security and AML/Terrorist Financing issues, the Mauritius Financial Services Commission (FSC) has been tasked with ensuring applicants have appropriate cyber-security and cyber-resilience policies and capabilities in place. Furthermore, the regulatory framework against money-laundering and terrorist financing for both banking and non-banking financial services will be harmonised and updated in line with the perpetually evolving developments in FinTech.

It remains to be seen how these initiatives will translate into practical scenarios – for example, it may be challenging to open a banking account in Mauritius for businesses involved in trading in digital assets. However, with the Mauritius FSC being simultaneously tasked with putting in place guidelines for investment in cryptocurrencies, these challenges may soon be something of the past.

Mauritius, with its recognised and sophisticated financial services industry and vibrant emerging ICT sector, is increasingly well placed to take advantage of the opportunities FinTech brings for both Africa and the rest of the world. The Mauritian Government’s course of action is clearly articulated along the lines of embracing blockchain and other disruptive FinTech technologies.

At Maitland, we will be watching developments closely. Given our expertise across structuring, company secretarial, corporate trustee, accounting and fund administration services, Maitland is ideally placed to assist businesses of a disruptive nature looking to take advantage of the emerging opportunity presented by Mauritius’s global business sector.

Most jurisdictions lack legal and regulatory certainty around the treatment and recognition of digital assets to mitigate these concerns. For more on cryptocurrencies, read Greg Kok’s article which also features in this edition.

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