Taiwan's Legislative Yuan has passed the Virtual Asset Service Act, introducing comprehensive regulations for cryptocurrency providers and stablecoin issuers.
Taiwan's Groundbreaking Crypto Regulation
On June 30, Taiwan's Legislative Yuan passed the Virtual Asset Service Act, which is now awaiting President Lai Ching-te's signature to become law. This legislation marks a significant shift in Taiwan's approach to cryptocurrency regulation, moving from minimal oversight to a comprehensive framework governing virtual assets.
Under the new act, all virtual asset service providers must secure licenses from the Financial Supervisory Commission (FSC). Stablecoin issuers face additional requirements, needing approval from both the FSC and the central bank while maintaining full reserves in trust.
Strict Penalties for Non-Compliance
The legislation imposes severe penalties for operating without a license, including potential imprisonment of up to seven years and fines up to NT$100 million (approximately $3.1 million). Offenses related to fraud or market manipulation could lead to three to ten years in prison.
The FSC, responsible for enforcing these regulations, noted that this law will enhance supervision over crypto firms and improve market integrity, transitioning from a focus solely on anti-money laundering (AML) registration.
Comprehensive Licensing Framework
The act categorizes virtual asset service providers into seven distinct types, including exchanges and custodians, each required to adhere to strict operational standards. Licensed firms must implement robust internal controls, cybersecurity measures, and maintain customer funds separately from company assets.
Firms currently registered for AML compliance will have a year to apply for a license after the law takes effect, with a full approval deadline of 21 months and a possible extension of three months.
Stablecoin Regulations
Issuers of stablecoins will be subject to even stricter regulations, requiring both central bank and FSC approval and regular audits of their reserves. This positions Taiwan alongside other regions, such as Japan and the EU, that are also advancing regulatory frameworks for cryptocurrencies.
