As global interest in virtual assets continues to grow, Mauritius is positioning itself as a key player in this dynamic sector. Virtual assets, including cryptocurrencies and digital tokens, are quickly evolving and Mauritius is actively embracing this transformation. The implementation of the Virtual Asset and Initial Token Offering Services (VAITOS) Act and the recent Bank of Mauritius (BOM) 2024 guidelines on virtual asset-related activities have established a structured environment for both innovation and responsible governance.
Intercontinental Trust Ltd (ITL), a leading corporate and fund services provider, has been at the forefront of this transition, supporting businesses in aligning with Mauritius’ regulatory framework while capitalising on emerging opportunities. In this exclusive conversation, Dinesh Sunnoo, Senior Manager – Fund Services at ITL, shares his insights on the impact of these regulatory changes, the challenges of onboarding VASPs, and the future of virtual assets in Mauritius. Excerpts:
- How have the guidelines issued by the Bank of Mauritius (BOM) in 2024 impacted the way financial institutions handle virtual asset transactions?
The Bank of Mauritius (BOM) 2024 guidelines on virtual asset-related activities have introduced a structured framework to align the interests, practices and governance standards of financial institutions dealing with Virtual Asset Service Providers (VASPs). While these guidelines establish clear requirements—such as enhanced due diligence (EDD), strict capital buffers, cybersecurity measures, and mandatory risk assessments—the onboarding of VASPs remains a significant challenge due to banks’ own internal risk management frameworks.
Most of the banks are still reluctant to fully engage with VASPs, particularly in opening accounts for accepting end-client funds. However, a shift is emerging, with some banks now willing to provide transactional banking services while maintaining a cautious approach. The VASPs still do not have an option of operating a Mauritian bank account to accept fiat currency from their customers to engage into the trading of digital assets.
- Can you explain the partial exemption regime extended to the sale of virtual assets and tokens? What does this mean for businesses operating in the sector?
The Finance (Miscellaneous Provisions) Act 2024 has introduced an amendment to the Income Tax Act by redefining the term securities to include virtual assets and virtual tokens. This change has a direct impact on the tax treatment of virtual assets in Mauritius, as gains on the disposal of securities are exempt from taxation. There is also no capital gains tax in Mauritius. By extending this exemption to virtual assets and tokens, businesses and investors engaged in the trading, issuance, and investment of digital assets will benefit from a tax-free environment on gains, including capital gains, making Mauritius a more attractive jurisdiction for crypto-related businesses.
This amendment provides a competitive advantage to Mauritius by positioning it as a crypto-friendly hub in the region. Businesses engaged in virtual asset trading platforms, security token offerings, and digital asset investment funds now have greater incentives to establish themselves in the country.
While this amendment has been made, it is important to note that the income derived by VASPs are not within the scope of the partial exemption regime. Currently, the partial exemption regime applies to specific categories of income, including certain financial services licenses under the Financial Services Act but it has not been clearly specified for the income derived by the VASPs from the fees that they will earn. However, for VASPs to fully benefit from this preferential tax treatment, we still need to see amendments to the relevant licensing provisions that would explicitly classify VASP activities alongside other financial services licenses that qualify for the 80% exemption. Until such amendments are made, VASPs operating in Mauritius must carefully assess their tax positions, as their eligibility for the partial exemption remains subject to amendments in the legislations.
- How does ITL Mauritius ensure compliance with the recently passed Virtual Asset and Initial Token Offering Services (VAITOS) Act? What are the key requirements for virtual asset service providers under this new law?
ITL has been proactively adapting to the regulatory framework established by the Virtual Asset and Initial Token Offering Services (VAITOS) Act. Recognising the evolving regulatory landscape, ITL has strengthened its compliance procedures to meet the requirements imposed by the FSC and also to meet up with the best standards. This includes focusing on enhanced due diligence measures, risk assessment frameworks, and ongoing monitoring of such clients. ITL has also invested in a KYCP portal, a sophisticated compliance software designed to streamline KYC and due diligence processes, ensuring that such client adhere to the AML/CFT obligations. Additionally, ITL has demonstrated its expertise by successfully assisting a client in securing in-principle approval from the FSC for a Class S Marketplace License.
- What steps has ITL Mauritius taken to ensure that the company’s virtual asset-related activities align with both the BOM’s guidelines and the broader regulatory framework in Mauritius? Mauritius is positioning itself as a regional hub for virtual assets. What opportunities and challenges do you foresee for businesses in Mauritius as the regulatory environment continues to evolve?
Mauritius introduced the VAITOS Act 2021 to regulate Virtual Asset Service Providers (VASPs) and Initial Token Offerings (ITOs) in line with Financial Action Task Force (FATF) standards. Given the high-risk classification of the virtual asset sector, the FSC has issued the AML/CFT Guidance Notes for Virtual Asset Service Providers & Issuers of Initial Token Offerings. From a regulatory standpoint, Mauritius has been at the forefront of establishing a comprehensive legal and compliance framework for Virtual Asset Service Providers (VASPs), ensuring that the sector operates within a secure and well-regulated environment. In line with these evolving regulations, ITL has remained compliant, reinforcing its internal controls, CDD processes, and transaction monitoring frameworks to meet the FSC’s and BOM’s prudential and AML requirements.
Beyond ensuring its own compliance, ITL has also been actively assisting clients in adhering to licensing and AML obligations under VAITOS. This has resulted in ITL successfully assisting a client in obtaining the FSC’s In-Principle Approval for a VASP license.
Mauritius is in a unique position to leverage upon its legacy role as a regional financial hub, especially for the adjacent African continent. Cryptocurrencies and digital assets have been reported being widely used for remittances and as store of value in many African countries given the conditions of their economies and financial sectors. Many African countries do not already have a developed regulatory regime like Mauritius to provide a safe and secured environment for users of cryptocurrencies and digital assets, hence it can be anticipated that Mauritius will be an ideal avenue for them to deal in such new assets class. The challenges faced by the sector abound, which are not unique to Mauritius; the adoption of cryptocurrencies is a double-edged sword which, on the one hand, benefits the mass but, on the other hand, is also used for illicit purposes, such as money laundering, tax evasion, etc. To safeguard against such abuse, FSC has introduced comprehensive laws including Travel Rules, AML/CFT policies and guidelines, market surveillance, etc to mitigate these risks. However, the effective implementation and enforcement of these laws will remain challenging because the digital assets economy is of global scale.
- Looking ahead, how do you see the virtual asset market in Mauritius developing over the next few years? Are there any new regulatory measures or trends that ITL is preparing for?
To create a robust ecosystem in Mauritius, the FSC and participants in the digital assets sector can showcase Mauritius as a hub for the region. This can be achieved by organising events and inviting international players to partake in discussion of the sector’s prospects, specific use cases for blockchain technology and digital assets in overcoming financial and regulatory challenges peculiar to the region, in particular financial inclusion, cross border remittances, etc. This is to create awareness across the region and in particular targeting the African countries, thereby solidifying Mauritius’ longstanding position as the financial and digital assets hub for the region. The Mauritius government and the FSC can also consider engaging their counterparts in Africa to foster closer cooperation in the digital assets sector for mutual benefits and to strengthen enforcement against illicit activities. As blockchain technology in general and the digital assets economy are fast evolving, there should be timely fine-tuning of regulations and guidelines to ensure its relevance and effectiveness.
