Fintech: Where do we stand?

The Fintech and Innovation-driven Financial Services Regulatory Committee held its first meeting last Friday. The day concluded with a Panel Discussion on ‘Creating the Enabling Legal and Regulatory Environment for Fintech Activities’. Different points of view were shared by the panellists. Major take-aways were that reputation is a key issue, and that the regulations surrounding Fintech should provide enough clarity to attract more attention and interest from investors.

It’s under the chairmanship of Lord Meghnad Desai, House of Lords (United Kingdom), that the Fintech and Innovation-driven Financial Services Regulatory Committee met for the first time on Friday 9th of February. Discussions were centred on positioning Mauritius as a regional hub of sound repute in the field of Fintech Regulations through the following initiatives : building an open and transparent regulatory regime for Fintech in Mauritius which encourages innovation; exchanging information with other recognised regulatory authorities to contain any kind of illegitimate activities; keeping cognisance of the best technological innovations and ensuring that Mauritius is at pace with the latest technological advancements in the Fintech ecosystem; in regulating blockchain-related activities, it will take into account the use of latest technology that will prevent hacking and other kind of frauds and; recognising the potential benefits of blockchain technology on the economy and society and encouraging its development.

Subsequent to this first meeting, the Committee will assess the current regulatory set up with respect to Fintech and Innovation-driven Financial Services Regulations in Mauritius, and make recommendations on the need to introduce new sets of regulations for Fintech and lnnovation. It will also identify priority areas within the regulatory space of Fintech activities.

The Committee is composed of the following members: Lord St John of Bletso, House of Lords; Loretta Joseph, Leader of the OECD's Global Blockchain Directorate and Chair of the Australian Digital Currency and Commerce Association; Nishith Desai, Founder of the Nishith Desai Associates Law Firm in India; Harvesh Seegolam, Chief Executive of the FSC; Yandraduth Googoolye, Governor of the Bank of Mauritius; and Rajesh Ramloll, Deputy Solicitor General.

In the afternoon, the members of the Committee held a Panel Discussion at the seat of the Financial Services Commission (FSC) on ‘Creating the Enabling Legal and Regulatory Environment for Fintech Activities’.

Below are key takeways from their interventions during the Panel Discussion.

Lord St John of Bletso

“Important for Mauritius to be seen as proactive”

  • For me, the big opportunity in Mauritius is the sophistication of what you have here. The fact is that you have a well-established infrastructure. You have highly-skilled human resources, solid broadband… As well as opportunities and challenges. One of the reasons why we have been meeting, and I feel very strong about this as a lawyer, is that as lawyers – in this situation – we need to really embrace where the opportunities are and be an enabler. Quite clearly, what we ought to be doing here is not regulating to stifle innovation, but identifying how we can build the good reputation that you have in this wonderful island, and embracing the whole realm, not just for the financial services sector.
  • I am not the expert on cryptocurrencies. As you might be aware, there are over 700 cryptocurrencies. At the moment there is a lack of transparency in terms of the regulations of these currencies.
  • Another point I would like to make is that demographics is going to raise huge challenges, as well as huge opportunities. Let’s look at the demographics of Africa whose population will reach over two and a half billion by 2025. A huge portion of the population is unbanked. In countries like Kenya, M-Pesa has been the most effective way of buying and selling currencies safely. I think we have to look out of the box. It’s not just about technology, it’s about making the right digital business model. That’s what we are about here.
  • There is huge competition in the financial services sector around the world. We know those that have been blacklisted. It is important for Mauritius to be seen to be proactive, to be one step ahead of the competition. Clearly, attempts are being made to close down some of the offshore centres for tax reasons.
  • It’s not about blockchain or cryptocurrencies. It’s about how Mauritius embraces financial services and Fintech, and embrace innovation. Technologies are changing rapidly.

Nishith Desai

“I see lots of opportunities, starting from India”

  • Our philosophy is that every new technology, every new business model, every new financial instrument, every new socio-economic development brings around new legal challenges. It’s typically what we do – we look at what will likely happen in five, ten or fifteen years. That is, we look at all these new technologies and what legal issues will come up. We do a lot of research and write papers. We can shape the future that we want. So, if we can work with Government, and development regulatory needs ahead of time, then there will not be the need to do things in a hurry. As I see in bigger countries like India, it takes a longer time to have a proper Fintech regulatory framework. There are risks and rewards, but decision-making process is longer, and therefore there is an opportunity for countries like Mauritius. All people want is clarity – whether to do this or not. Also, we need to be very mindful of reputation, especially in the financial services sector. If we can have a reputed regime for this activity, I am sure markets like India will be ready to come here.
  • When we talk of Fintech, the most important part is technology. So, it is important we combine both financial services strengths, but also technological strengths, especially the security aspect.
  • I see lots of opportunities, to start with, from India. What is unfortunate is that we had a committee appointed last year in India who said that by the end of the year they will come up with legal clarity. However, people are living in uncertainty. So, if we can convey a message that Mauritius is a jurisdiction which is going to be open, with strong Know-Your-Customer (KYC) among other things, maybe things will start with the Indian market.
  • Around the world people are asking questions – where should we go for Initial Coin Offerings (ICOs), for sandbox etc. We’ve been getting two or three enquiries every day, and we are wondering as to which jurisdiction we should direct them. On the other hand, people are going anywhere and raising crazy amounts, and you do not know anything about security of the investors. We need to protect the investor. We need to see how foreign governments, how European jurisdictions and the OECD will look at us.
  • We are here to have a transparent and more open regime, just as we needed in terms of tax. I remember during those old days, one of the first thing the Mauritian government told the Indian government is that we can exchange information if so and so conditions are fulfilled. In those parameters, we are open to any government in the world. If there is any illegitimate use of cryptocurrency, we are here to exchange information.
  • One of the things we should be doing is make sure how Mauritius can fill up the vacuum that is there, Mauritius being a reputable jurisdiction. If you want to be a leader in the market place, what do you need to do? There are only two things – choose your customer and an area of focus. So, first decide what kind of people you want to encourage to come to Mauritius, and customise their needs. This needs to be well articulated. Then, you must have one strong attribute. For example, put forward that our jurisdiction is very open, transparent and we are not going to allow any illegitimate activities. Decide what you want to sell – Mercedes or Maruti. There’s nothing wrong with one or the other segment. Singapore has done this job very well.
  • We should set up a Blockchain University in Mauritius. I think this is a brilliant idea. Not only people from within Mauritius can develop expertise, but also bring people from outside to come and learn. The university creates an ecosystem on its own.

Lord Meghnad Desai

“Above all, you have to safeguard your reputation”

  • One of the things we have to do along the way is to clarify the nature of the beast. Because there is the word “coin” in “Bitcoin”, it is mistaken for money. We have to draw very clear lines – Bitcoins and cryptocurrencies are not money as we understand money today. Many governments are saying these are not legal tender. It is an abstract commodity which people buy. It has no other use. All these cryptocurrencies are assets people own in the hope they will generate high values.
  • Clarifying all these will give Mauritius a start and state that this is going to be a clean market. We are hoping we will be able to make a good start to get Mauritius on the right path. We need to have a clear set of rules, and we have to allow scope for changes in the future. We cannot make legislations within which new entrants might not be able to get in.
  • Above all, you have to safeguard your reputation. Reputation is the most valuable asset that Mauritius has, and it is something which can be easily lost. We need to ensure that the regulations are absolutely water-tight. It is something we have to balance out, but there is hope that we will be able to come up with it because quite a lot of work has already been done.

Loretta Joseph

“You have to build the proper ecosystem and regulation”

  • Mauritius has a very strong KYC regime, and we have to build on that. There is no one jurisdiction that is being clear about what are the rules or not. I think Mauritius has an incredible opportunity. Nobody wants to kill innovation. So you have to build the proper ecosystem and regulation.
  • Investors look for a place where they are confident, they are safe and there is proper legislation and regulation around the sector. Mauritius sits in a very good position to do that because you have a financial services background.
  • There is no point trying to regulate looking backwards. We need to regulate looking forward and be innovative, and bring about responsible regulation.

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