The Financial Services Commission (FSC) of Mauritius has issued guidance notes on its policy towards stablecoins, aiming to establish a clear and robust regulatory regime for any institution issuing or trading in virtual assets within the island state. The guidance notes, published on 13 August, clarify the responsibilities of those who issue or trade in stablecoins, a form of digital asset whose value is tied to a real-world asset, such as a fiat currency or a commodity. Closer regulation is necessary due to the rapid increase in the use and popularity of decentralised finance, which has led to stablecoins being used for various purposes and potentially impacting the financial system.
According to the FSC, the guidance notes establish a clear and robust regulatory regime for stablecoins in Mauritius. The FSC’s regulatory focus is on the core function and purpose of any particular stablecoin, rather than its form, following the principle of “same risks, same rules”. This approach ensures that stablecoins are regulated in a manner that is consistent with their potential risks and benefits, rather than being treated as a distinct category of assets. Stablecoins are considered virtual assets under the Virtual Asset and Initial Token Offerings Services Act 2021, eligible for trading, payment, and investment, and anyone trading or paying with them must be licensed by the Bank of Mauritius.
The guidance requires stablecoin issuers to hold reserves and liquid assets to cover their liabilities and comply with measures for anti-money laundering, combatting the financing of terrorism, and data security. Issuers must have a robust operational risk and resilience framework, publicly disclose key information, including asset valuation and policies on redemption and ownership, and take measures to stabilise the asset and minimise fluctuations. The guidelines also explicitly prohibit the issuance, distribution, or facilitation of algorithmic and yield-bearing stablecoins, which are considered to pose unique risks to investors and the financial system.
Janesh Chuttoo, a corporate and commercial transactions barrister, says the guidance is a welcome development for Mauritius in its positioning as a modern and internationally aligned digital-assets jurisdiction. The FSC’s guidance is based on industry feedback, coordination between regulators, and alignment with global standards, which provides an important degree of confidence to both market participants and investors.
The FSC’s emphasis on substance over form, reserve-asset segregation, redemption at par, transparency, independent assurance, governance, and operational resilience provides a robust framework for the regulation of stablecoins in Mauritius. The guidance notes also contain a warning, noting that although stablecoins have the potential to enhance the efficiency of the financial services sector and contribute to increased financial innovation, they may also generate new risks for investors and the financial sector at large.
The FSC statement accompanying the launch of the new guidelines highlights the importance of a robust regulatory framework for stablecoins in supporting responsible innovation in the virtual asset ecosystem, enhancing investor protection, and safeguarding the integrity and stability of the financial services sector. The guidance notes are a significant development in the regulation of stablecoins in Mauritius, and their impact will be closely watched by market participants and investors. As the island state continues to develop its regulatory framework for digital assets, it is likely that further guidance will be issued to address specific issues and provide greater clarity on the operation of the regulatory regime.
The next important question, according to Chuttoo, will be how these principles operate in practice, particularly in relation to the legal nature and enforceability of a holder’s redemption claim, the treatment of reserve assets and holders’ rights in an issuer or custodian insolvency, and the practical operation of cross-border arrangements where the issuer, reserve assets, custodians, and users are located in different jurisdictions. These are not necessarily omissions from the current framework, but are areas where greater certainty will become increasingly important as Mauritius moves from establishing the regulatory perimeter to facilitating sophisticated stablecoin businesses.
In the broader context of Mauritius’s regulatory environment, the FSC’s guidance notes on stablecoins are part of a larger effort to establish the island state as a hub for digital assets and financial innovation. Other regulators, such as the Financial Crimes Commission, have also issued guidelines on related topics, such as the responsibility of companies to fight corruption, fraud, money laundering, and drug financing. A study published last month placed Mauritius among the top 10 African nations for anti-corruption standards, highlighting the island state’s commitment to maintaining a robust and transparent regulatory environment.