Discours de Rajanah Dhaliah sur « The Virtual Asset and Initial Token Offering Services Bil »

Le PPS et député de Piton / Rivière du Rempart a pris part le 10 décembre 2021 aux débats sur le projet de loi présenté par le ministre des Services Financiers qui vient compléter les directives de GAFI.

1. Mr Speaker Sir,

I thank you for allowing me to take the floor to debate on this vital piece of legislation, that is, the virtual asset and initial token offering services bill in this August Assembly.

At the very start, let me say that this bill bears testimony of this Government’s will and determination to stick to its vision and commitment to place Mauritius among the leading countries in terms of innovation and the provision of appropriate legal frameworks to better regulate the various sectors of economic activities.

Certes, nous avons entendu, et nous entendrons encore des commentaires négatifs, mais je voudrais tout simplement souligner que nous, de ce côté de la Chambre, nous avons une vision pour cette République et ses habitants.

Permettez-moi également, Monsieur le Président, de rappeler les nombreuses critiques émises contre le gouvernement et les nombreuses questions parlementaires adressées ici-même dans cette auguste Assemblée quand le pays avait été placé sur la liste grise du GAFi. Toutefois, nous avons démontré notre volonté de renverser la donne, et aujourd’hui, nous allons encore plus loin en démontrant que nous aspirons à ce qu’il y a de mieux pour notre pays et son économie.

2. Mr Speaker Sir,

With increasing innovations and developments in technology, the virtual asset landscape is growing at an unprecedented rate. Virtual asset trading activities have risen dramatically in recent years and, with that, the risks associated with virtual assets have become more apparent: breaches in customer security; market manipulation; and the potential to use virtual assets in money laundering and terrorist financing. This government is more than determined on catching onto the need, and benefits, of developing regulatory frameworks in respect of this emerging market, and the virtual asset space is finding itself increasingly subject to regulatory scrutiny.

3. Mr Speaker,

I commend the Minister of Financial Services and Good Governance for having presented this bill to the house. We previously debated the cybersecurity and cybercrime bill which is
a clear message that this government is well aware of the threats evolving in and around the cyberspace. The cybersecurity and cybercrime bill plays an important role in subsequently implementing the VA & ITOS bill

– I will dwell on this further later during my speech.

4. Mr Speaker Sir,

Blockchain, bitcoin, crypto assets, virtual currencies … a whole new vocabulary describing innovative technology to swiftly transfer value around the world. The fast-evolving blockchain and distributed ledger technologies have the potential to radically change the financial landscape. But, their speed, global reach and above all – anonymity – also attract those who want to escape authorities’ scrutiny. Blockchain originated just over 10 years ago. Since then, virtual assets have become widely available and have started to be used as payment products. However, without established regulation and oversight, the sector is often still referred to as the “wild west” of the finance industry.

5. Monsieur le Président,

J’aimerais rappeler à la Chambre un exemple que j’ai soulevé lors de mon intervention sur le projet de loi sur la cybersécurité et la cybercriminalité, à savoir qu’en 2017, l’attaque de rançongiciel « Wannacry » a pris en otage des milliers de systèmes informatiques jusqu’à pousser les victimes à payer aux pirates une rançon en bitcoin. Le coût de l’attaque est allé bien au-delà de la rançon, entraînant des dommages estimés à 8 milliards de dollars pour les hôpitaux, les banques et les entreprises à travers le monde. D’autres attaques de ransomware se sont produites depuis et semblent être à la hausse.

Mr. Speaker, Sir,

This bill makes provision for custody and protection of client assets at paragraph 17 and also for the prevention of market abuse at paragraph 18.

6. Monsieur le Président,

Les actifs virtuels présentent de nombreux avantages potentiels. Ils pourraient rendre les paiements plus faciles, plus rapides et moins chers ; et fournir des méthodes alternatives pour ceux qui n’ont pas accès à des produits financiers réguliers. Mais sans réglementation appropriée, ils risquent de devenir un refuge virtuel pour les transactions financières des criminels et des terroristes. Le GAFi a suivi de près les développements dans la crypto-sphère et, ces dernières années, les premiers pays ont commencé à réglementer le secteur des actifs virtuels, tandis que d’autres ont complètement interdit les actifs virtuels.

7. Monsieur le Président,

Cependant, jusqu’à présent, la majorité des pays n’ont pris aucune mesure, mais NOUS, DE CE CÔTÉ DE LA CHAMBRE, en tant que gouvernement proactif – nous suivons fermement les recommandations du FAFT. Ces déficiences identifiées dans le système de réglementation mondial ont créé d’importantes lacunes dont les criminels et les terroristes peuvent abuser. Monsieur le Président, au paragraphe 2 de l’exposé des motifs – il est clairement mentionné que c’est la FSC qui aura la responsabilité de la fourniture d’une licence aux Virtual Asset Service Providers (VASPs), l’enregistrement des Initial Token Offerings (ITO) et de s’assurer que les fournisseurs de VASP et les ITO se conforment aux directives AML / CTF – en se référant à la Financial Intelligence and Anti-Money Laundering Act, la Financial Services Act et la United Nations Act 2019.

8. Monsieur le Président,

En tant que gouvernement responsable, grâce à ce projet de loi, nous appliquerons les mesures préconisées par le FAFT, et cela sans perdre de temps. Cela garantira la transparence des transactions d’actifs virtuels et gardera les fonds liés à la criminalité et au terrorisme hors de la cryptosphère. Aujourd’hui, de nombreux fournisseurs de services d’actifs virtuels sont perçus comme des «entreprises risquées» et se voient refuser l’accès aux comptes bancaires et autres services financiers réguliers.

9. Monsieur le Président,

Bien que la mise en œuvre des exigences du FATF soit difficile pour le secteur, elle finira par accroître la confiance dans la technologie blockchain en tant qu’épine dorsale d’un moyen robuste et viable de transférer de la valeur. Le FATF a révisé sa méthodologie d’évaluation, qui définit comment il déterminera si les pays ont mis en œuvre avec succès ses recommandations visant à réglementer le secteur des fournisseurs de services d’actifs virtuels.

10. Mr Speaker Sir,

Often referred to as “Blockchain Island”, to-date Malta has taken a very progressive approach to cryptocurrency regulation, with established exchanges and businesses relocating to the region. This can be attributed to a series of laws enacted by the Maltese Government in 2018, aiming at providing regulatory certainty over the use and development of cryptocurrencies within the jurisdiction. The laws provide for a framework of regulatory instruments based on three fundamental principles – market integrity, consumer protection, and industry due diligence – and are as follows:

1. The Malta Digital Innovation Authority Act,

2. The Innovative Technology Arrangements and Services Act,

3. The Virtual Financial Assets Act.

Specifically, they provide a licensing system for providers of virtual financial asset services and regulate connected activities, including the initial offerings of these assets and the certification of platforms that these assets are offered on. Additionally, a designated regulatory body oversees the framework to ensure its effective implementation. Regulating Virtual Asset Service Providers (VASPs) avoids the danger that the growing cryptocurrency phenomenon is pushed underground. Getting regulation right ultimately helps to bring legitimacy and certainty to the sector in the eyes of institutional investors.

11. Mr Speaker Sir,

Through this bill we will ensure that the legal framework is equipped to deal with the many contentious policy issues surrounding crypto and its sub-groups. Here I would like to highlight an important aspect mentioned in the fourth schedule – sections 27 and 32 as annex to the bill, paragraph w – I quote “the Bank of Mauritius does not recognise virtual tokens as a legal tender nor as a form of payment instrument that is regulated by the central bank…” unquote, be it transaction mechanisms like Bitcoin, tokens like Ethereum or NFTs. The prime public policy concern revolves around financial stability and how consumer and investor protection can be ensured.

Other concerns are illegal activity such as money laundering and terrorism finance. And Blockchain, upon which crypto technology hinges, firstly isn’t immune to theft and secondly comes with the risk of no support or guarantee in case of any loss or hacking of the system.

12. Mr Speaker Sir,

At paragraph 31 of this bill, provision is made for the advertisement related to ITOs which shall not be misleading. Here, I would like to refer to Blockchain site Poly Network which revealed that hackers had exploited a vulnerability in its system and hence manipulating information on its website. In addition, the largest single recovery of a cryptocurrency fraud by the US to date – the BitConnect Ponzi scheme scam – swindled thousands of people of more than $2 billion worth of bitcoin. The US government is analysing all these aspects in order to ensure the security of the financial system and prevent misuse of technology driven financial instruments.

13. Mr Speaker Sir,

Sometimes the relationship between promoting financial innovation and tackling financial crime is posed as a zero-sum game. However, on this side of the house, we believe that the relationship between taking a tough stance on financial crime and enabling world-leading financial innovation to benefit consumers, is complementary.

14. Mr Speaker Sir,

Criminals are generally rapid in adapting to new technologies. From the initial use case of automobiles as ‘getaway cars’ or malware to steal personal information in the early days of the internet, criminals were there first. This is because they are always on the hunt for new ways to commit old crimes and evade regulatory authorities using a new technology or methodology. However, this ‘catch me if you can’ phase of any technological development, where many of use cases are nefarious, is hindered once a comprehensive regulatory framework to tackle the risks is implemented.

15. Mr Speaker Sir,

It has been over a decade since Satoshi Nakamoto published the Bitcoin Whitepaper, and today the crypto-asset market and the regulation around it looks quite different. First of all, there are many more crypto-assets, exchanges and businesses operating in this space, which has grown into an industry measured in billions, rather than millions. As the value and use of crypto-assets have grown, so have the risks for financial crime.

As crypto-assets enable digital value transfer across the globe, they enable a unique set of potential money laundering risks. Through this bill, crypto-assets are identified as a growing conduit for global money laundering and widespread concern about this typology among our law enforcement agencies.

16. Mr Speaker Sir,

As we move forward from the implementation of this bill to supervision and enforcement, one area we are always looking towards is international regulatory guidance. These documents help inform our domestic approach and over the past few years, US agencies have set the benchmark when it comes to communicating with the crypto-asset market. Examples of these seminal documents include the SEC guidance on the Ethereum Decentralised Autonomous Organisation (DAO) published in 2017, or the CFTC’s 2018 guidance on crypto-asset derivatives, or FinCen’s guidance published last year, which covered custodial and non-custodial crypto-asset business models. These documents are not just useful for the market. We also find that they help inform our regulatory thinking in this fast-moving space.

17. Lastly, one area that will be increasingly important is not just sharing views on crypto-assets but also working together in enforcement cases and through intranational regulators such as FATF – which we have done in the past.

Here I wish to also highlight and commend the tremendous painstaking job by all stakeholders and the Mauritian Government to take Mauritius off the FATF’s grey list. Financial crime, especially in this market, rarely respects borders.

18. Mr Speaker Sir,

To conclude, allow me to stress that when we initiated the implementation of the AML regime for crypto-assets, members on the other side of the house and other key actors were pessimistic on the way we would regulate Bitcoin or ‘the blockchain’. This government is not in the business of picking winners but regulating financial activities. Therefore, our answer is and will still be, this is not different. We apply the same AML standards we expect from businesses operating in traditional financial services to the crypto-asset economy. This strikes the right balance by facilitating innovation created by this technology, while tackling the new risks of financial crime.

19. Mr Speaker Sir,

On this note, I fully support all the provisions of this bill.

20. Long live the Republic of Mauritius!

21. Thank you, Mr Speaker Sir!