Taiwan Approves Virtual Asset Service Act
In a significant development for the cryptocurrency industry, Taiwan’s Legislative Yuan has officially approved the Virtual Asset Service Act, paving the way for clearer regulations for crypto exchanges and stablecoin issuers. The law passed its third reading on June 30 and is now awaiting further action from President Lai Ching-te to become official.
Shift in Regulatory Approach
This new legislation marks a shift in Taiwan’s approach to cryptocurrency regulation, moving from just handling anti-money laundering registrations to implementing comprehensive oversight that includes maintaining market order and protecting customers. The Financial Supervisory Commission (FSC) has detailed that the act will establish guidelines for a variety of virtual asset service providers (VASPs), including trading platforms, custodians, lending firms, and others.
Requirements and Compliance
According to the FSC, the act will introduce specific requirements such as internal controls, cybersecurity protocols, guidelines for asset listings, customer asset protection, and civil liabilities. Businesses involved with cryptocurrencies must now secure approval from the FSC to operate legally. Existing companies that have already registered under anti-money laundering laws will have a grace period of 12 months to seek the necessary approvals and a total of 21 months to secure their licenses under the new regulations. Additionally, the FSC has indicated that if more time is needed, a one-time extension of three months may be granted.
Regulations for Stablecoins
The legislation introduces strict regulatory measures for stablecoins as well. Issuers are required to obtain endorsements from both the FSC and Taiwan’s central bank prior to launching any tokens. This includes obligations to maintain a full reserve of assets, have those reserves placed in trust, and ensure regular audits and disclosures.
Criminal Penalties
Previously, there had been discussions about allowing local banks to issue stablecoins linked to the New Taiwan dollar, extending the central bank’s role in overseeing stablecoins and setting up a framework for their approval via the FSC. The newly passed act also imposes serious criminal repercussions for unauthorized activities related to VASPs and stablecoin issuance, with potential prison sentences reaching seven years and fines up to NT$100 million (approximately $3.14 million). More severe penalties, including up to a decade in prison and fines from NT$10 million to NT$200 million, can be applied for fraud or market manipulation.
Aligning with International Standards
This legislative move gives the crypto sector in Taiwan a more solid legal footing following years of ambiguity. It aligns Taiwan’s regulatory stance more closely with international standards, particularly those seen in regions like the European Union, Japan, and South Korea. Recently drafted by the FSC, the establishment of this act transforms initial proposals concerning stablecoin regulations, customer protections, and licensing protocols into enforceable law, which will soon take effect.
Future Developments
As discussions arose about the government’s cryptocurrency holdings, it was evident that digital assets are evolving from mere compliance conversations to major policy issues in Taiwan. The FSC plans to continue working on sub-regulations around licensing standards and will engage with industry representatives to ensure the successful implementation of the law’s provisions, which are critical for the future structure and governance of Taiwan’s burgeoning crypto market.
