The Financial Services Commission (FSC) of Mauritius released new guidance on stablecoins to establish a regulated framework for digital assets tied to real-world assets like fiat currencies or commodities. The rules, published on August 13, outline requirements for issuers and traders under the country’s Virtual Asset and Initial Token Offerings Services Act 2021.
Regulator targets stability and oversight
The FSC stated the guidance became necessary as stablecoins, initially considered a low-risk entry into digital assets, expanded in use and complexity. Their growth in decentralized finance introduced risks to the financial system.
Under the new rules, stablecoins fall under the virtual asset category. Any entity using them for trading, payments, or investments must obtain a license from the Bank of Mauritius. Issuers must maintain reserves and liquid assets matching liabilities, follow anti-money laundering measures, and enforce data security protocols. Directors and senior managers bear responsibility for protecting holders and ensuring sound business practices.
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Issuers must also disclose asset valuations and redemption policies publicly while implementing measures to reduce fluctuations. The FSC prohibited algorithmic stablecoins—those pegged through supply-and-demand algorithms rather than off-chain assets—and stablecoins that generate interest or revenue.
Global alignment with local enforcement
Janesh Chuttoo, a corporate and commercial barrister at Orison Legal in Mauritius, described the guidance as an important step for the country’s digital assets sector. He emphasized the focus on substance over form, reserve-asset segregation, and transparency as factors that build investor confidence.
The FSC developed the rules with industry feedback and alignment with global standards. The standards align with those from the Financial Stability Board, the International Organization of Securities Commissions, and the Basel Committee on Banking Supervision. Chuttoo noted this alignment matters due to the cross-border nature of stablecoin operations.
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While stablecoins could improve financial efficiency, the FSC cautioned about associated risks. It urged investors to exercise caution and engage only with regulated entities, noting that stablecoins remain subject to volatility.
The FSC presented the guidance as a way to balance innovation with investor protection. The rules establish a foundation that may adapt as the market evolves.