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Mauritius has announced new regulatory framework for security token offering

Apr 18, 2019

The Mauritius Financial Services Commission (Commission) has recently clarified the new rules relevant to projects planning security token offerings (STOs).

In its guidance published Monday, the Commission declared that security tokens are considered to be digitally represented securities, as defined in the Securities Act of 2005, hence if STOs are conducted in or from Mauritius, it will be regulated by a local security legislation, including the requirement for a prospectus.

Moreover, according to the regulator, there will be no STO in Mauritius without prior approval. It is worth to note that there are several exceptions for when a token issuer needs authorization. If the issue is targeting “sophisticated” or “expert” investors and funds, or professional investment schemes, prior approval is not necessary. Carrying out financial services without a license is a criminal offense.

The FSC warns investors of the "high-risk" nature of STOs. Also, every STO project is obliged to inform its clients of the risks they would face and the fact that they are not protected by any statutory compensation arrangements. Every issuer raising funds through STO's shall conduct suitable due diligence of its project, team and the rights and obligations regarding the assets backing the tokens.

As you may see, the Mauritius regulator remains highly supportive of Fintech-related initiatives within the country. The above-mentioned guideline follows a first clarification note from the regulator, issued in September 2018, on cryptocurrency as an asset class.

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