Mauritius FSC Regulators Formulate STO Guidelines For Security Token Offerings

Mauritius Regulators Formulate Guidelines For Security Token Offerings (STOs)

At a time when security token offerings are fast gaining traction in the cryptospace, with some observers even touting it as a game changer, Mauritius watchdog, the Mauritius Financial Services Commission (FSC) has put in place new laws to govern the issuance of security token in the state, according to reports on April 10, 2019.

Mauritius FSC Regulates Security Token Offerings

In a bid to eliminate uncertainties and foster innovation, the Mauritius Financial Services Commission (FSC) has published new rules that startups interested in launching security token offerings (STOs) must follow in the state.

In its latest guidance document, the FSC made it clear that blockchain-based security tokens are also securities, in accordance with the Securities Act of 2005 just that they are in digital form.

Against that backdrop, prospective STOs organizers in the state are required to register with the FSC and get an approval, prior to launching issuing security tokens.

However, if the STO on offer is mainly for institutional investors or high net worth individuals, then such projects are not required to get approval from the regulator before commencing operations.

STOs Promoters Must Be Licensed

Also, the FSC has reportedly noted that any individual or group of people soliciting others to invest in security tokens must also obtain the necessary license from the FSC and they must operate in strict adherence to laws contained in the Securities Act.

The FSC has also said that STOs project organizers who fail to obey the law will be treated as criminals.

Specifically, it is now mandatory for STO promoters to conduct their due diligence and clearly define the “rights and obligations” as regards the underlying assets backing the tokens.

STO project organizers are also required to clearly outline the risks involved and explain it to investors in simple terms, in a timely and accurate manner.

FSC Says STOs Are Risky

Just as several financial regulators in various jurisdictions around the world keep doing, including the United States Securities and Exchange Commission (SEC), the FSC has stated explicitly in a separate document that financial instruments such as STOs are high-risk investments and there are no laws in the region or compensation agreements to protect investors when such projects crash.

It’s worth noting that the FSC has been hard at work trying to sanitize the nation’s cryptospace of late.

Earlier in February 2019, Bitcoin Exchange Guide informed that the FSC had announced plans to start issuing licenses to cryptocurrency custodians in the region, in a bid to foster transparency and encourage innovation in its blockchain and crypto industry.

“In revolutionizing the global fintech ecosystem through this regulatory framework for the custody of digital assets, my government reiterates its commitment to accelerating the country’s move to an age of digitally-enabled economic growth,” Pravind Kumar Jugnauth, prime minister of the Republic of Mauritius declared at the time.