Taiwan’s Stablecoin Initiative
Taiwan is on track to introduce its inaugural domestically issued stablecoin by late 2026, as lawmakers advance legislation aimed at regulating digital currencies. Despite this progress, critical factors such as the stablecoin’s reference currency remain under discussion.
Recent updates from local media highlight that Peng Jin-long, the chair of the Financial Supervisory Commission (FSC), informed legislators that the draft for the Virtual Assets Service Act has successfully passed initial cabinet evaluations and is poised for a third reading in the upcoming legislative session.
Once approved, specialized regulations for stablecoins are anticipated to follow within a six-month timeframe, suggesting a potential rollout by the end of 2026.
Regulatory Framework and Challenges
Initially, while the proposed law does not limit issuance to banking institutions, it is expected that financial entities will spearhead the stablecoin initiative, illustrating a cautious regulatory approach as Taiwan embraces the concept of local digital tokens. The FSC is closely collaborating with the Central Bank of the Republic of China (Taiwan), which has historically maintained stringent regulations to prevent the Taiwan dollar from being used abroad, a factor that critically influences the discussions surrounding the stablecoin’s parameters.
A stablecoin linked to the Taiwan dollar would face significant hurdles due to existing foreign exchange regulations, which restrict the currency’s circulation outside of Taiwan. Conversely, a stablecoin pegged to the US dollar would likely sidestep many regulatory complications and better facilitate international transactions, aligning with global financial practices, especially in cross-border payments.
Concerns and Regulatory Measures
The very nature of stablecoins, which allow for low-cost and rapid cross-border transfers, raises concerns among regulators regarding their potential to undermine long-standing policies aimed at keeping the local currency contained within Taiwan and preventing unofficial offshore pricing. In response, authorities are currently crafting regulations that would:
- Mandate full reserve backing for stablecoins
- Enforce strict separation of client assets
- Ensure that custody remains within the domestic legal framework
These measures aim to mitigate risks from the outset.
Future Considerations
An intriguing aspect still unresolved is the currency that the stablecoin will ultimately support. According to Peng, the final decision hinges on market demand without any current commitment to either the Taiwan dollar or the US dollar.
Broader Regulatory Context
In related developments, the Taiwanese government is considering the possibility of including Bitcoin in its national reserves. The Executive Yuan and the Central Bank are in agreement to assess Bitcoin as a strategic asset, including the exploration of pilot holdings involving BTC that has been seized and is awaiting auction.
In a broader context of regulatory scrutiny, Taiwan’s legal system recently charged 14 individuals connected to a significant crypto money-laundering case, revealing a NT$2.3 billion ($75 million) fraud operation that misled over 1,500 victims through counterfeit cryptocurrency exchange franchises.
The fraudulent network, operated by Shi Qiren, featured over 40 storefronts under deceptive names like “CoinW” and “BiXiang Technology,” falsely presenting themselves as legitimate exchanges while diverting investor funds to foreign crypto accounts.
Authorities managed to confiscate substantial assets, including cash and luxury goods worth over NT$100 million, with Shi potentially facing a lengthy prison sentence for a multitude of offenses. The investigation underscored weaknesses within Taiwan’s cryptocurrency regulation framework, suggesting that any prospective stablecoin must address these vulnerabilities to foster an environment of trust and security for investors.
