Taiwan has taken its initial steps towards regulating digital assets by submitting a draft cryptocurrency law to the Legislative Yuan for its first reading. The proposed legislation, known as the Virtual Asset Management Bill, aims to define virtual assets, set operational standards for asset operators, ensure customer protection, and mandate membership in industry associations and regulatory permissions.
Taiwan has taken a relatively laissez-faire approach to the cryptocurrency sector, regulating it primarily under existing “know your customer” and anti-money laundering laws.
However, the regulatory process gained momentum after the collapse of cryptocurrency exchange FTX in November. The exchange has gained popularity among Taiwanese users due to attractive interest rates in US dollars compared to local banks.
Unlike cryptocurrency regulations in neighboring Hong Kong, the new bill does not take a firm stance on derivatives or stablecoins. He recognizes that derivatives linked to virtual assets possess unique properties, with specific mention of perpetual contracts.
This recognition opens the possibility of specific regulations for cryptocurrency derivatives in future drafts of legislation. Most importantly, the draft law does not restrict the trading of virtual assets to professional investors.
Unlike Japan, which requires custodians to use locally licensed exchanges, the draft law in Taiwan requires segregation of client assets from business funds. It does not explicitly require the use of external trustees.
Under the proposed legislation, operators of cryptocurrency exchanges would be obliged to commission accountants to submit periodic reports on their operations and the assets they supervise. Moreover, they will be required to allow regulatory bodies, such as the Financial Supervision Commission, to conduct regular inspections of their internal control and audit systems.
While this initial draft of the bill does not specifically mention “proof of reserves,” it does state that the regulator will establish standards for asset ratios in consultation with the industry and expect licensed exchanges to adhere to these standards.
Stakeholders in the cryptocurrency industry in Taiwan have expressed their support for official regulatory oversight. Wayne Huang, co-founder and CEO of Taipei-based fintech XREX, stressed the need for cooperation between the virtual asset service provider industry and the Financial Services Commission to define regulatory processes.
A date for the second reading of the bill has not yet been set, with the Financial Services Committee expected to provide its input and suggestions for the project before any further legislative action is taken.
Regulatory measures target unregistered foreign cryptocurrency exchanges
In a previous Finance Magnates report, it was stated that Taiwan’s Financial Supervision Commission (FSC) has introduced strict regulations, effectively banning unregistered forex exchanges from operating in the country.
These measures are part of Taiwan’s commitment to strengthening investor protection and responsible practices in the cryptocurrency industry. The Financial Services Commission (FSC) guidance targets virtual asset service providers (VASPs) operating in Taiwan, requiring segregation of treasury assets from client assets and mechanisms for listing and delisting of crypto assets.
Foreign VASPs are prohibited from providing services in Taiwan without regulatory approval. The FSC is also encouraging self-regulation within the cryptocurrency industry and is considering establishing a dedicated office for cryptocurrency-related matters.
Taiwan has taken its initial steps towards regulating digital assets by submitting a draft cryptocurrency law to the Legislative Yuan for its first reading. The proposed legislation, known as the Virtual Asset Management Bill, aims to define virtual assets, set operational standards for asset operators, ensure customer protection, and mandate membership in industry associations and regulatory permissions.
Taiwan has taken a relatively laissez-faire approach to the cryptocurrency sector, regulating it primarily under existing “know your customer” and anti-money laundering laws.
However, the regulatory process gained momentum after the collapse of cryptocurrency exchange FTX in November. The exchange has gained popularity among Taiwanese users due to attractive interest rates in US dollars compared to local banks.
Unlike cryptocurrency regulations in neighboring Hong Kong, the new bill does not take a firm stance on derivatives or stablecoins. He recognizes that derivatives linked to virtual assets possess unique properties, with specific mention of perpetual contracts.
This recognition opens the possibility of specific regulations for cryptocurrency derivatives in future drafts of legislation. Most importantly, the draft law does not restrict the trading of virtual assets to professional investors.
Unlike Japan, which requires custodians to use locally licensed exchanges, the draft law in Taiwan requires segregation of client assets from business funds. It does not explicitly require the use of external trustees.
Under the proposed legislation, operators of cryptocurrency exchanges would be obliged to commission accountants to submit periodic reports on their operations and the assets they supervise. Moreover, they will be required to allow regulatory bodies, such as the Financial Supervision Commission, to conduct regular inspections of their internal control and audit systems.
While this initial draft of the bill does not specifically mention “proof of reserves,” it does state that the regulator will establish standards for asset ratios in consultation with the industry and expect licensed exchanges to adhere to these standards.
Stakeholders in the cryptocurrency industry in Taiwan have expressed their support for official regulatory oversight. Wayne Huang, co-founder and CEO of Taipei-based fintech XREX, stressed the need for cooperation between the virtual asset service provider industry and the Financial Services Commission to define regulatory processes.
A date for the second reading of the bill has not yet been set, with the Financial Services Committee expected to provide its input and suggestions for the project before any further legislative action is taken.
Regulatory measures target unregistered foreign cryptocurrency exchanges
In a previous Finance Magnates report, it was stated that Taiwan’s Financial Supervision Commission (FSC) has introduced strict regulations, effectively banning unregistered forex exchanges from operating in the country.
These measures are part of Taiwan’s commitment to strengthening investor protection and responsible practices in the cryptocurrency industry. The Financial Services Commission (FSC) guidance targets virtual asset service providers (VASPs) operating in Taiwan, requiring segregation of treasury assets from client assets and mechanisms for listing and delisting of crypto assets.
Foreign VASPs are prohibited from providing services in Taiwan without regulatory approval. The FSC is also encouraging self-regulation within the cryptocurrency industry and is considering establishing a dedicated office for cryptocurrency-related matters.