The Core Responsibilities of Virtual Asset Service Providers Under the Mauritius Regulatory Framework

The Virtual Asset and Initial Token Offerings Services Act 2021 in Mauritius establishes a comprehensive regulatory framework that outlines the responsibilities of Virtual Asset Service Providers (VASPs).

This article delves into three pivotal aspects of VASP obligations, as outlined in the Act, namely the custody and protection of client assets, the prevention of market abuse, and the transfer of virtual assets.

  1. Custody and Protection of Client Assets

a) Sufficient Custody

VASPs with custody of virtual assets for clients must maintain an adequate amount of each type of virtual asset to fulfill their obligations to clients.

b) Ownership Clarification:

The virtual assets held by VASPs should be specifically for the entitled clients and not considered the property of the VASP. Importantly, these assets should not be subject to the claims of creditors of the VASP.

Legal Definition

The Act aligns with the Financial Intelligence and Anti-Money Laundering Act in defining terms such as “property,” ensuring clarity and legal coherence.

2. Prevention of Market Abuse:

a) Adequate Systems and Controls

VASPs are mandated to implement systems and controls that are proportionate to the scale and nature of their business activities. This includes measures for recording, storing, and protecting information, monitoring transactions, and ensuring business continuity in the face of disruptions.

b) Class “S” License Holders

Specific requirements are outlined for Class “S” license holders, particularly those operating virtual asset exchanges. These requirements include identifying suspicious activities, preventing abusive trading strategies, and taking immediate steps to address market manipulative activities.

c) Prompt Reporting and Remedial Measures

Class “S” license holders are obliged to notify the Commission promptly upon detecting market manipulative or abusive trading activities. Additionally, they must implement remedial measures as directed by the Commission.

3. Transfer of Virtual Assets

a) Detailed Transfer Requirements

When a transfer of virtual assets occurs, the originating VASP must obtain and securely submit required and accurate originator and beneficiary information to the respective virtual asset service providers.

b) Information Accessibility

Information obtained and held during transfers must be readily available to the Commission and other relevant competent authorities upon request.

c) Strict Compliance Requirements

Originating VASPs are prohibited from executing transfers that do not comply with the specified requirements, ensuring strict adherence to regulatory standards.

Responsibilities of Beneficiary VASPs

Beneficiary VASPs are tasked with identifying transfers lacking required information, implementing risk-based policies for decision-making, and taking appropriate follow-up actions.

Conclusion

The Virtual Asset and Initial Token Offerings Services Act 2021 positions Mauritius as a jurisdiction committed to fostering responsible practices within the virtual asset service industry.

By outlining clear responsibilities related to custody, market abuse prevention, and virtual asset transfers, the regulatory framework seeks to instill confidence, transparency, and integrity in the burgeoning virtual asset ecosystem.

As the global landscape evolves, these regulations underscore Mauritius’ dedication to maintaining high standards in virtual asset services.