The authorities in the island nation of Mauritius plan to start issuing custodian licenses to companies holding digital assets on behalf of clients. The financial regulator said the existing licensing regime is not suited for that purpose, although licensees under the new rules will have to comply with similar requirements.
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Applicants Required to Maintain Minimum Capital
The Financial Services Commission (FSC) of the Republic of Mauritius has published a draft framework for the “Custodian Services (Digital Asset) License” it intends to issue to companies in the fintech sector. The watchdog is now seeking feedback on its proposal from industry representatives, other stakeholders and members of the public. Interested parties have been invited to send comments and suggestions via email. Discussions and consultations will continue until the end of November.
The FSC currently issues two types of licenses for custodians providing traditional financial services that do not reflect the specifics of safekeeping cryptocurrency-based assets. The digital asset license is tailored to account for the differences and ensure compliance with relevant existing regulations and laws.
According to the draft, the holders of the “digital” license will be regarded as financial institutions under the Financial Intelligence and Anti-Money Laundering Act, which was adopted in 2002. The companies will be obliged to adhere to other laws and regulations dealing with anti-money laundering and counterterrorism financing matters. These include the FSC Code on the Prevention of Money Laundering and Terrorist Financing, as well as other applicable subordinate statutory instruments.
The specific requirements for cryptocurrency businesses include an obligation to “have and maintain a minimum stated unimpaired capital of not less than 500,000 Mauritian rupees,” which equals almost $15,000. Applicants for the license must also set up offices on the island and have permanent representatives on hand to deal with the FSC and maintain the records of the custodian. The companies must be governed by boards of directors composed of three or more members, “at least one of whom shall be resident in Mauritius.”
Custodians Obliged to Insure Digital Holdings
Under the new license, companies are expected to ensure they are adequately staffed to perform all duties regarding the safekeeping of cryptoassets, transaction management and other relevant operations. Additionally, the providers of custodial services will have to subscribe to insurance protection for the assets that are kept in custody. During the application process they must submit evidence of such arrangements to the FSC. The businesses must have systems in place to ensure compliance with all reporting requirements under Mauritian law as well.
According to the glossary of legal terms provided in the document, the definition of “digital assets” includes electronic tokens representing the holder’s access rights to a service or ownership of an asset. They are considered a digital representation of value which can be used as a medium of exchange, unit of account and store of value. The tokens can also represent assets such as debt or equity in the promoter or “provide access to a blockchain-based application, service or product.” Digital assets, however, are not yet accepted as legal tender in the country.
What do you think about the new licensing regime for digital asset custodians in Mauritius? Share your thoughts on the subject in the comments section.
Images courtesy of Shutterstock.
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