By Surya Foollee

The year 2022 was a milestone for the role of virtual assets in financial regulatory reforms. The increasing use of these assets with the onset of bitcoins in 2009 and the emergence of decentralised finance (DeFi) since 2013 have triggered a chain of events around financial regulations, supervision, and monitoring of the fintech space. Mauritius has enacted the Virtual Assets and Initial Token Offering Services Act (VAITOS) in 2022, upholding the latest recommendations of Financial Action Task Force (FATF) Virtual Assets and Virtual Asset Service Providers guides. It is worth noting that FATF deconstrued several times definitions around the topic to devise a fair representation of various interpretations of virtual assets in this ever-changing, intricate financial ecosystem. VAITOS seems to be one of the key regulations that lay the real foundation in the new era of technology at least for Mauritius and by extension for clients over Africa.

Re-engineering the provision of financial services in Mauritius

Over the past three decades, Mauritius has grown exponentially from a mono-crop economy in the 1960s to a vibrant financial hub in 2020. Our banking sector consists of 23 licensed banks, including 8 international banks, and through years the range of activities equals those banks in developed countries, constantly in line with international standards. Intuitively or by default, the growth of the banking sector in Mauritius is directly related to the rise of the global business since 1993 or vice versa. The other lines of services like hospitality industry, insurance, stock exchange, wealth management, debt structuring, tax and entrepreneurship were also important income streams for the economy as well as fuelling the financial services sector. The Bank of Mauritius is the regulator of the banking sector and the Financial Services Commission regulates the non-banking financial services sector which includes most of the components previously mentioned.

Both regulators have been performing during past years under several enabling laws which have fit the puzzle of the financial services sector for steady ease of doing business and most importantly creating the synergy for Mauritius to be known as a jurisdiction of excellence within Africa. It is also imperative to mention the positive reactiveness of several governments during this time, which has maintained a sustainable growth in the sector with conducive policy decisions and their implementations. In these past two years, there have been several bills, those enacted or announced, and they demarcate from their aspects of bringing the jurisdiction and the financial services sector to interdisciplinary levels, at the expense of physical boundaries.

As we delve deeper into the technological aspects of laws which are being overhauled below, we must be reminded from a distant view that some of the quantum leaps of the past in technology were not easily achievable. They were feats which have been absorbed or undeniably rendered unimportant through the achievements of greater technological designs. However, the technological governance in Mauritius has been mainly achieved through technocratic decisions based on achieved results in developed countries. Perhaps, this leads to the omission or minimisation of trial and errors aspects subsequently in our technological implementations.

The road to digital transformation will be a long one.

The Covid pandemic has been the much-needed spark plug to restart the world financial services. There is a similar pattern of events from the fear of data loss from the war in the past which instigated IBM to sketch the alternative infrastructure for data contingency plans, fortuitously to be known later as the internet. Likewise, the fear of covid-19 this time has set the stage for a de-cluttering of corporate hubs and the enhanced viability of the online dual carriage of activities for the financial services. It is to be noted that the shift to this new phase has not been a kid’s roadmap to a treasure hunt but rather a well-thought-out plan B from various think tanks around the world and through decades to respond to so called ‘what ifs’ of scenario makers. This roadmap, in contrast, about the transfer of technology, the onset of cloud computing, the thinking behind digital transformation, the connectivity of the world as one and the marketing of digitalisation mainly through handheld devices might be the next road to glory for the tertiary economy. Or the reengineering process of the financial services in Mauritius is already a work in progress?

Mauritius’ well-established institutions

Quite a revelation during the pandemic, remote access to corporate transactions showed that we have already crossed the Rubicon of the importance of offices. Whilst local businesses are wrought in all sorts of capital-intensive activities, higher credit went to international companies which happened to be asset-light structures, moving and shifting through paradigms of cost structures efficiently during the pandemic. In its midst, there is reason to believe that they showed a certain attractiveness to prospects for having a pricing policy promoting cost leadership in an atmosphere of working capital that helps the transformation of businesses for clients with an unusual ease. In the same period, Mauritius reinforced its position to consider frameworks other than sandbox licenses, upgrading to newer legislations, recomforting its position to look into the future of cryptocurrency and blockchain for the country. The Covid Act was also an activator for financial companies to review their interactions which evidently discarded an administrative red-tapism, unveiled technologically during the lockdowns.

Mauritius seamed into the early stages of fintech implementation for the sub-Saharan region as from 2014 on the back of conclusive actions from international financial hubs like Dubai, the United States and Jersey. Since then, we have swayed in the fickle crowd of fintech enablers and as per the Global Innovation Index 2021, Mauritius ranks first for its innovation capabilities in contrast to the 27 economies in the sub-Saharan region. A sophisticated financial services system back home undoubtedly pre-empted the authorities to work their way to a well-defined plan of action to seep in digital initiatives in our corporate and individual routines. The road to digital transformation will indeed be a long one, seemingly now requiring regular digital outputs from us, adding on to the speed of technological expansion and innovation around us.

The innovation index shed quite some light on the capabilities of Mauritius to respond to the integration to a fintech ecosystem through a set of well-established institutions and enhanced market sophistication as the likes of those in advanced economies. A key factor remains the provision of specialised human capital to assist in the integration to a sound, legal, compliant, and regulated environment which will ensure success of new asset classes, specifically virtual assets for Africa.

Surya Foollee
Surya Foollee is Manager Research & Development at DTOS.