- April 18, 2022
- Posted by: BlueAzurite
- Category: Tax Relief
As a previous article advanced, the Virtual Asset and Initial Token Offering Services (VAITOS) Act 2021 was enforced on the 7th of February 2022. This is part of the government’s efforts to facilitate the implementation and process of new technologies in Mauritius and to give investors, businesses and consumers the opportunity to leverage technological advancements in a safe and regulated environment. This new Act is going to cover and regulate the use and distribution of ‘Virtual Assets’ (VAs) and ‘Initial Token Offerings (‘ITOs’). For the purpose of this article, we are going to look at Virtual Assets.
What is a Virtual Asset?
According to the VAITOS act, a virtual asset is simply a digital representation of value. It can be electronically traded or transferred and used for payment or investment purposes. However, digital representation of fiat currencies and other financial assets under the authority of the Securities Act do not count as virtual assets.
VASPs will be regulated by the Act
One of the main operations regulated under the act is VASP – Virtual Asset Service Providers. A VASP denotes an individual that conducts the following operations (one or more) on behalf of another person, as his business activity.
- Exchanges between Virtual Assets and fiat currencies
- Exchanges between one or more forms of virtual assets
- Transfer of Virtual Assets
- Safekeeping of Virtual Assets or instruments enabling control over Virtual Assets
- Administration of Virtual Assets or instruments that authorise control over Virtual Assets
- Participating in and providing financial services related to an issuer’s offer and sale of a Virtual Asset.
Types of licenses available under the VASP regime
The VASP regime englobes several sub-categories of licences. These are
- Holders of Class M (Virtual Asset Broker-Dealer) licences. These enable the operation of activities such as exchanges between Virtual Assets and fiat currencies or exchanges between one or more forms of Virtual Assets.
- Class O relates to Virtual Asset Wallet Services. These are licences related to the transfer of Virtual Assets.
- Class R which is linked to Virtual Asset Custodian. Holders of this type of licence are responsible for safekeeping of virtual assets or instruments enabling control over virtual assets.
- Class I is a Virtual Asset Advisory Services licence is required for the participation in and provision of financial services related to an issuer’s offer and/or sale of Virtual Assets.
- Class S which is applicable to virtual asset exchanges. This is a centralised or decentralised virtual platform, in or out of Mauritius, that facilitates the exchange of Virtual Assets for fiat currency or other Virtual Assets for third parties in exchange of a fee, a commission or some other form of benefit. Holders of this type of licence can hold custody or control Virtual Asserts on behalf of their clients to facilitate exchanges. They can also purchase Virtual Assets from a seller when transactions, bids or offers are matched and sell them to a buyer.
How to apply for a VASP licence?
An application for a VASP licence must be made to the FSC, clearly specifying the relevant class or sub-category of licence applied for.
To obtain a VASP licence, the applicant must fulfil the following criteria:
- It must be a duly registered company conducting business activities in or from Mauritius.
- The company must be directed and managed from Mauritius
- The company must a physical office in Mauritius
- It must ensure that each one of its controllers, beneficial owners, associates and officers are in compliance with the ‘fit and proper’ criteria of the FSC.
To determine whether an applicant is directed and managed from Mauritius, the FSC will take into consideration several factors. Some of them might be:
- the location of strategy, risk management and operational decision making
- the location of executives responsible for the above-mentioned decision making
- the location the management team meets to discuss about and introduce policy decisions
- the location of board meetings
- the place of residence of officers, employees or directors.
Continuing obligations of VASPs
The requirements, with regards to the licences, mentioned in the Act can be compared to the licensing requirements under the Financial Services Act. One of its stipulations is that no shares or legal or beneficial interest in a licensee may be transferred to a person without the approval of the FSC if
- the transfer is less than 5%,
- the transfer does not result in a person holding more than 20% of the shares/ legal or beneficial interest,
- the transfer does not result in a change of control.
Moreover, the following activities require the approval of the FSC
- issues of shares
- appointment of controllers, beneficial owners and officers of a licence
- modifying the scope of activities related to the VASP
- reorganising the legal structure of a VASP
- Change of name or change of an external auditor.
Additionally, VASPs are financially obligated to maintain a minimum stated unimpaired capital. This depends on the class or subcategory of the licence. It should maintain a separate account from that of its clients and put in place proper record keeping, including keeping information on the originators and beneficiaries involved in any transfer of Vas. Every year, an annual audited financial statement must be filed to the FSC.
Ensuring the protection of its clients, VASPs must put in place adequate systems and controls at all times when keeping Virtual Assets in their custody. This will prevent market abuse. VASPs must also ensure that an adequate amount of each type of virtual asset is maintained to meet its obligations towards its clients.
Finally, an important measure that must not be forgotten is strict compliance with AML/CFT regulations and the setting up of sound and adequate measures to combat money laundering and the financing of terrorism.