The Financial Services Commission, the financial watchdog of Mauritius, has released a draft of a new set of laws that will cover an aspect of blockchain technology.
The new licence is to be called the ‘Custodian Services (Digital Asset) Licence’. The draft will be open to public comment from the 5th to the 30th of November.
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Half a million rupees
The draft says that the new licence is being created because the two existing custodian licences do not adequately cover digital assets.
It says that holders will need to comply with the same things that traditional custodians do. The draft reads: “…the holder of the Custodian Services (Digital Asset) Licence will also be considered as a “financial institution” under the Financial Intelligence and Anti-Money Laundering Act 2002 (the “FIAMLA”) and will be required to adhere to the Anti-Money Laundering and Counter-Terrorist Financing (“AMLCFT”) related laws, regulations and codes…”
Other stipulations include that a custodian must at all times have available capital of 500,000 Mauritian rupees (approximately $14,492), that it maintains a board of at least three people, one of whom is a resident of the island, and that it maintains an office on the island.
The money kept must also be fully insured.
Digital assets are for sophisticated investors
The FSC does not consider cryptocurrency to be legal tender, but recognises it as a store of value according to a text published on the 17th of September entitled “Digital Assets as an asset-class for investment by Sophisticated and Expert Investors”.
In this guidance it recognised the value of tokens that act as currencies, utilities, and equity. It declined to recognise as legitimate tokens that cannot be exchanged for legal tender, and which are used for gambling. It defined cryptocurrency as a sub-category of digital assets.
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The most notable part of the text is when it states that because the assets are so volatile, they should only be available for investment for ‘sophisticated investors’, ‘expert investors’, ‘expert funds’, and ‘specialised/professional collective investment schemes’.
The term ‘sophisticated investor’ generally means one with high net worth and a background in financial dealings.
First applicant for licence
Meanwhile, GMEX Group of London, a provider of brokerage software, announced the creation of a new venture undertaken in partnership with two companies – the ‘Mauritius International Derivatives and Commodities Exchange’ and Hybrid Stock Exchange Corporation Limited, an exchange platform on the NEM blockchain.
The new venture is called the HYBSE International Marketplace, and it is waiting for the new licence to be finished so it can ask for one.
According to the official announcement, the new exchange is a “revolutionary blockchain exchange platform” while will “enable institutional investors access to cryptocurrency ETF’s [sic] and other crypto-instruments.”
One new product to be offered by the new entity is an ‘initial blockshare offering’, which is explained as “a time-limited offer to purchase cryptonized-equities and other cryptonized-instruments, such as blockshares, from businesses registered on the HYBSE International Marketplace at special discounted rates.”
Apparently, this will allow the 1.7 billion people without access to banks to participate in the stock market.
The venue has been set up in Mauritius because of the new licence, described above. It will apply for such a licence and aims to begin operations in the first quarter of 2019.