Mauritius Regulator Issues Cautionary Note on Stablecoins

Mauritian regulator, the Financial Services Commission (FSC), has warned against potential risks associated with stablecoins, a type of cryptocurrency designed to maintain a stable value by pegging it to fiat currency or other tangible assets.

While stablecoins offer stability compared to volatile cryptocurrencies, their usage has expanded to decentralised finance applications (DeFi), posing risks to the financial system.

The FSC’s guidelines require stablecoin issuers to comply with the Virtual Asset and Initial Token Offerings Services Act (Vaitos Act) and maintain a substantial capital base and liquidity.

The regulator insists that algorithmic stablecoins, linked to virtual assets, pose higher risks than those tied to physical assets.

Investors have been urged to approach stablecoin investments with caution, as the nature of these digital assets varies.

The FSC has encouraged dealing with regulated entities and warned that investments in stablecoins aren’t protected by legal compensation provisions.

Source: Le Mauricien