On April 8th 2019, Mauritius published guidance outlining its regulations for compliant Security Token Offerings (ST0s). Ultimately, the commission classified security tokens as securities, but in digital form.
Mauritius Security Token Regulation Explained
In jurisdictions throughout the world, to include the United States and Hong Kong for example, tokenized securities must abide by existing securities laws.
The case is no different in Mauritius, according to recent clarification published by the Mauritius Financial Services Commission (FSC).
Back in September 2018, Mauritius published guidance explaining how security tokens are an asset class for “sophisticated and expert” investors.
Now, in documentation released this past Monday, the FSC said security tokens are classified as securities per the country’s Securities Act 2005.
As a consequence, enterprises conducting Security Token Offerings in Mauritius are required to receive FSC approval. Notably however, if the issuer is targeting sophisticated or expert investors, approval is not required.
Any party soliciting others to transact security tokens is also required to see FSC approval. Any deviation from such laws can result in a criminal offense.
Rules for such solicitation of tokens include due diligence of the STO’s underlying asset, its team, and all rights associated with token ownership.
Issuers of STOs are also required to provide appropriate information disclosure, by informing investors of risks in an “accurate, timely, and transparent” manner.
How Security Tokens Offer Clear Regulatory Requirements
Security Token Offerings (STOs) differ from Initial Coin Offerings (ICO) in numerous ways. Perhaps the most important is the clear regulatory guidelines surrounding security tokens.
While ICOs continue to remain clouded with regulatory ambiguity in jurisdictions throughout the world, a growing number of the world’s securities watchdogs have declared security tokens as subject to existing securities laws.
The result has been an increase of STOs due to their regulatory safety.
Companies have left the ICO behind, and turned to the STO as a compliant means to raise private capital.
While ICOs currently raise 58 times less than they did at this time last year, STOs saw a 130% increase in Q1 2019 when compared to the previous quarter.
For more on security token functionality, be sure to review our complete guide to security tokens.
What do you think about the guidelines issued from the Mauritius FSC? Will security tokens being subject to existing securities laws eventually become a global consensus? Let us know what you think in the comments section below.
Image courtesy of Mauritius FSC.