Financial sector developments in mauritius

The Stock Exchange of Mauritius SEM was opened to foreign investors following the lifting of the foreign exchange controls in

Financial sector developments in mauritius

From the price of Bitcoin shooting from a starting price in the region of USD at the beginning of January to a surprising USD 19, around mid-Decemberto the taking off of the ICO Initial Coin Offering concept as a novel fundraising method which allowed blockchain startups worldwide to raise in excess of USD 4 billion YTD2, one can only conclude that crypto investors have been kept on their toes during the past year trying to hunt for the next bitcoin whilst sifting the legitimate ICO projects from the scams.

Governments worldwide have also been kept busy trying to stay abreast of the developments in this industry with jurisdictions such as Japan and Canada showing favourable tendencies towards the adoption of cryptocurrencies as a method of payment, but other jurisdictions such as China and South Korea cracking down on the use of these currencies.

The predictions regarding cryptocurrencies are broad and differ widely with some professionals fearing that bitcoin is a bubble which will soon burst, whilst others are more optimistic and feel that the price of Bitcoin will keep rising over the coming years.

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As far as Mauritius is concerned, the Bank of Mauritius has so far been very cautious in its approach to cryptocurrencies, they issued a warning on the 18 Decemberadvising members of the public to exercise utmost care and diligence when dealing with virtual currencies, and further explaining that members of the public need to be aware of the risks associated with unregulated virtual currencies, which do not provide the same protection as 'hard' or 'real' money.

However, as may be the case worldwide, opinions differ regarding cryptocurrencies and blockchain technologies. Whilst the Bank of Mauritius has so far maintained its stand regarding cryptocurrencies with the former Governor, Ramesh Basant Roi, reiterating in November that one must be prudent when dealing with virtual currencies, the Board of Investment in Mauritius has adopted a more open approach to this sector by launching its new Regulatory Sandbox License in The Regulatory Sandbox License4, announced in the National Budget in Mauritius and proclaimed on the 20 Octoberoffers the possibility for an investor to conduct a business activity for which there exists no legal framework, or adequate provisions under existing legislation in Mauritius.

The Regulatory Sandbox License will be issued by the Board of Investment now part of the Economic Development Board to eligible companies willing to invest in innovative projects according to an agreed set of terms and conditions for a defined period.

To date, a number of licenses have already been issued. Meanwhile, at a press briefing on the 23 Octoberthe Minister of Financial Services and Good Governance announced the establishment of a committee of technicians from the Financial Services Commission and the Bank of Mauritius, in order to take stock of the development of the cryptocurrency sector, evaluate this market and present a roadmap in this area5.

The discussions of the Committee were centred on positioning Mauritius as a regional hub of sound repute in the field of Fintech Regulations by: Building an open and transparent regulatory regime for Fintech in Mauritius which encourages innovation; Exchanging information with other recognised regulatory authorities to contain any kind of illegitimate activities; Keeping cognisance of the best technological innovations and ensuring that Mauritius is at pace with the latest technological advancements in the Fintech ecosystem; In regulating blockchain-related activities, it will take into account the use of latest technology that will prevent hacking and other kind of frauds; Recognising the potential benefits of blockchain technology on the economy and society, and encouraging its development; Considering incentives to attract Fintech activities to Mauritius; and Reflecting on the possibility of establishing a sovereign fund in Mauritius to provide seed capital for the development of Fintech activities in the region.

Subsequent to this first meeting, the Committee will assess the current regulatory set up with respect to Fintech and Innovation-driven Financial Services Regulations in Mauritius, and make recommendations on the need to introduce new sets of regulations for Fintech and lnnovation.

Financial sector developments in mauritius

It will also identify priority areas within the regulatory space of Fintech activities. So far we impatiently wait to hear the outcome of the works of the Committee.

But when we look at the existing legislative framework in Mauritius, although it is clear that crypto or virtual or digital currencies are not currently regulated by the Bank of Mauritius, the question that often crops up regarding ICOs or token sales is the following: So as to assess whether an issue or sale of crypto tokens would be regulated by the Securities Act, we would first need to analyse the definition of securities under the Securities Act: The details of each ICO and of the token being sold or issued will depend on that individual ICO but generally, we note that tokens issued during an ICO do not give right to equity in the underlying company, do not give rights to interest on the amount invested, do not give shareholders or equity rights and are generally devoid of any rights other than that of being a functional good which enables the user to have access to the underlying platform linked to the project.

Financial sector developments in mauritius

The issuer is also often quick to state that the token sale is not an offer of securities and that the holder should not purchase the token as a speculative exercise.

The white paper of an ICO often also makes statements such as no promise of future performance is made with respect to tokens, tokens are not participation in the company and hold no rights in the company, and the company may freely spend proceeds received from the ICO without any conditions.

Therefore, we can only conclude that to date, unless the white paper detailing the token sale describes the tokens so that it falls within the above-mentioned definition of securities, ICOs remain unregulated under the Securities Act of Mauritius.

This absence of a regulated environment for this new form of fundraising may seem wary to some hardened investors used to functioning in well defined and licensed environments but the skyrocketing price of virtual currencies as well as continued investment in new ICOs make us conclude that interest in this sector continues to grow despite the volatility of such assets and the risks associated thereto.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.Mauritius’s financial sector has shown resilience in the face of recent setbacks to the economy.

Financial institutions are in general well . History of financial sector developments in Mauritius. In 's, a strategic change took place as Mauritius switched from agricultural sector to the industrial sector.

The government implemented an import substitution strategy with the intention to reduce imports considerably. Mauritius’s relatively large offshore financial sector is grappling with the need to adapt to a fast-changing global regulatory environment, and there are ambitious plans under development to re-position Mauritius as a regional financial hub.

Future developments in the sector are critical to the overall economic outlook for Mauritius as it contributes . Starting 8 as a mono-cropped, inward-looking economy, Mauritius moved toward an export oriented and diversified economy producing textiles, tourism, financial and ICT services.

However, the country’s economic model has been showing signs of distress, associated with the loss of preferential trade access, negative terms of trade and . The Financial Sector Assessment Program (FSAP) is a joint program of the International Monetary Fund and the World Bank.

Launched in in the wake of the Asian financial crisis, the program brings together Bank and Fund expertise to help countries reduce the likelihood and severity of financial sector . Resource metadata: {srmvision.comcationTime=, srmvision.comterEncoding=null, srmvision.comterMap={}, srmvision.comtType=application/pdf, srmvision.comonTime.

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