What Happened?
The upcoming draft of the “Virtual Asset Service Act” will establish licensing standards for virtual asset service providers (VASP) in Taiwan, manage stablecoins, and impose criminal liability for fraud and manipulation. The goal is to enhance market integrity, protect traders’ rights, and establish a trust foundation for industry development.
The Financial Supervisory Commission (FSC) has adopted a phased approach to regulation and emphasized that future subsidiary regulations will further clarify stablecoin standards, while also considering the use of a financial sandbox to promote innovation. The Central Bank has suggested a tiered management of cryptocurrencies based on transaction volume and stressed that domestic and foreign regulations should be consistent to avoid regulatory arbitrage.
Industry representatives generally affirm the framework of the specialized law but also call for avoiding excessive regulation, extending the transition period, clearly defining regulations post-application denial, and retaining flexibility in the regulations to respond to rapid market changes. They also hope that foreign operators will not be restricted to avoid missing opportunities for foreign investment.
Legislators have reminded that cryptocurrencies pose risks as tools for fraud and money laundering, urging strengthened KYC and OTP mechanisms. They suggest that regulation should “promote benefits” rather than be limited to anti-money laundering measures, such as allowing exchanges to go public, including virtual assets in mandatory property declarations, and even considering the inclusion of cryptocurrencies in “sovereign reserves” and opening Bitcoin spot ETFs to avoid marginalizing Taiwan’s digital economy.
Full Analysis of the Key Points of the FSC’s Cryptocurrency Specialized Law
This morning (12th), the Finance Committee of Taiwan’s Legislative Yuan held a public hearing on the “Virtual Asset Service Act,” inviting representatives from industry, government, and academia to discuss the regulation of cryptocurrencies in Taiwan. The aim is to gather opinions from all sectors to refine regulations related to virtual assets for application at various levels.
Taiwan’s regulation of cryptocurrencies has gradually transitioned from an initial anti-money laundering framework to a more comprehensive specialized law management. Currently, the FSC has incorporated virtual asset service providers (VASP) into anti-money laundering regulations and is promoting the establishment of self-regulatory associations and the formulation of self-regulatory norms.
The recently proposed “Virtual Asset Service Act” further clarifies the licensing of VASP, the management of stablecoins, and establishes criminal liability for fraud and manipulation, indicating the government’s intention to enhance market integrity, protect traders’ rights, and provide a trust foundation for industry development. Additionally, it actively references international trends and solicits opinions from various sectors to establish a regulatory model that meets Taiwan’s local needs.
FSC Vice Chairman Chen Yen-liang first pointed out that the “Virtual Asset Service Act” draft is the future financial infrastructure, akin to building bridges and roads for towns. It serves as a principle-based overarching direction, defining the framework, with details to be further discussed through subsidiary regulations. He emphasized that the core of finance is trust, thus virtual asset services must establish trust, which can be divided into two aspects: regulations and self-regulatory compliance by operators.
To this end, the FSC has held over 20 communication briefings and has divided the management of Taiwan’s virtual asset market into four major phases based on international regulatory trends:
1. Issuing the “Anti-Money Laundering and Counter-Terrorism Financing Regulations for Virtual Currency Platforms and Trading Businesses” to initiate regulation.
2. Actively promoting the establishment of an industry association for VASP and formulating self-regulatory standards.
3. Adding a VASP registration system in the “Anti-Money Laundering Act” and imposing criminal liability on illegal operators.
4. Promoting the legislative process for a specialized law on virtual asset management (currently in this stage).
Key Concerns and Suggestions from Various Sectors
Industry Perspective
Industry representatives generally agree that the draft structure aligns with international standards but emphasize avoiding excessive regulation. The Chairman of the Taiwan VASP Association, Zheng Guang-tai, spoke on behalf of the operators, calling for the FSC to extend the transition period for the “Virtual Asset Service Act.” He emphasized that operators face significant preparation burdens during the approval process under the specialized law, including coordinating joint defense data and handling custody operations. The current timeline outlined in the draft is insufficient for operators to prepare adequately, so he hopes for a degree of extension from the FSC.
Zheng Guang-tai also suggested that if an operator’s application is denied in the future, clear regulations should be set, such as prohibiting operations once a formal notice is received to avoid uncertain “grace periods.” The Honorary Chairperson of the Taiwan Fintech Association, Cai Yu-ling, also emphasized that while fraud is a major challenge, it should not hinder industry development. She urged that legislation should be flexible, supporting a regulatory design that allows for authorized primary laws and detailed subsidiary regulations to adapt to rapidly changing markets.
She specifically reminded that Taiwan should not impose excessive restrictions on foreign operators to avoid missing opportunities for foreign investment. She believes that requiring traditional financial institutions to simultaneously operate core virtual asset businesses and mandating operators to join the association may compress the development space and voice of new entrepreneurs, suggesting that the market should remain open and flexible.
Taiwan Fintech Association Secretary-General Zheng Xue-feng suggested that the authorization regulations for stablecoins and commercial payment activities should be clearly defined to reduce compliance costs for the industry. He advocated for more detailed distinctions in business models to avoid regulatory confusion. The Director of the Taiwan Anti-Money Laundering Virtual Assets Association, Jian Shu-yong, cited recommendations from the Global Digital Finance (GDF) in the UK, emphasizing that the terminology in the specialized law should better align with the standards of the Financial Action Task Force (FATF) and that regulations should be formulated based on the principle of proportionality. He also warned against directly transplanting the EU’s MiCA regulations and stressed the need for flexibility to adapt to the local market.
Official Perspective
FSC Vice Chairman Chen Yen-liang stated that future subsidiary regulations for the “Virtual Asset Service Act” will more clearly regulate stablecoins and consider promoting relevant innovative developments through a financial sandbox. The FSC also welcomes international operators that comply with Taiwanese regulations to participate in the local virtual asset market and will carefully consider extending the transition period to give operators ample preparation time. Moreover, consumer protection will be a key focus in subsidiary regulations, and discussions will explore how to apply the “Financial Consumer Protection Act” to the virtual asset field to construct a comprehensive management framework.
Central Bank Business Bureau Director Hsieh Feng-ying proposed that cryptocurrencies could be managed in tiers based on transaction volume and emphasized that domestic and foreign regulations should remain consistent to avoid regulatory arbitrage. This means that if foreign operators want to conduct related businesses in Taiwan, they must obtain approval from the FSC.
Regarding cryptocurrency regulation, several legislators have also put forward specific suggestions. Legislator Zhong Jia-bin reminded that cryptocurrencies have now become tools for laundering money for fraud groups, pointing out that there is currently a lack of KYC (Know Your Customer) and OTP (One-Time Password) mechanisms similar to those in banks and securities firms for third-party payments and cryptocurrencies, which could become a gap in anti-money laundering measures.
Legislator Ge Ru-jun, starting from international trends, shared the progress of countries like the United States, Japan, and South Korea in stablecoin legislation and the opening of ETFs.
He believes that the FSC’s restrictions on cash purchases of cryptocurrencies will hinder industry development and suggests retaining some space for cash acquisition of virtual assets. Ge Ru-jun further recommends including cryptocurrencies in “sovereign reserves” for strategic discussions to respond to international financial fluctuations and calls for plans to issue stablecoins to avoid marginalizing Taiwan’s digital economy. He also advocates for opening Bitcoin spot ETFs to allow both institutions and individuals to participate in the international market.
Academic Perspective
Yang Yue-ping, an associate professor at the National Taiwan University College of Law, pointed out that while the specialized law draft references regulations from multiple countries, it still retains space for Taiwan’s own considerations and adjustments, particularly regarding issues like the delisting of foreign platform apps. Although such discussions have occurred, they ultimately were not included in the draft due to considerations involving voluntary use by the public and technical operations.
Lin Meng-xiang, an associate professor and director of the Department of Financial Technology Applications at Ming Chuan University, suggested strengthening the establishment and entry regulations for VASP, advocating that both domestic and foreign operators should be reviewed under the same standards and connected with Taiwan’s “Asian Asset Management Center” policies.
He simultaneously argued for the establishment of a multi-tier differentiated regulatory framework, introducing thematic sandboxes to encourage collaboration between VASP and financial institutions, and called on regulatory authorities to address the shortage of professional regulatory personnel and enhance the dispute resolution mechanisms of financial consumer review centers to strengthen regulatory foundations and respond to potential disputes.