Virtual Asset Special Act Schedule Revealed for the First Time
As virtual assets continue to rise rapidly on a global scale, effective regulation has become an important issue for governments and financial regulatory authorities worldwide. Due to the anonymity and cross-border nature of virtual asset transactions, the potential risks of money laundering and fraud have drawn extensive attention from Taiwan’s Financial Supervisory Commission (FSC), prompting them to study the possibility of enacting a special act.
FSC Chairman Huang Tien-Mu will report on the “Virtual Asset Special Act Development Process” to the Legislative Yuan’s Finance Committee today (12th). From the written report submitted to the Finance Committee on the 11th, it can be seen that the regulatory development of the cryptocurrency industry will be divided into four stages, ultimately leading to the establishment of a special act. This is also the first time that the FSC has publicly revealed the schedule for enacting the cryptocurrency special act.
Stage 1: Including VASP Operators under Regulation
The first stage will begin with anti-money laundering regulations, focusing on including “Taiwan Virtual Asset Platform and Trading Service Providers” (VASPs) under regulation. According to information on the FSC’s official website, a total of 25 cryptocurrency businesses have completed the declaration of compliance, including exchanges, trading platforms, physical stores, virtual asset automated teller machines (BTMs), and custody system providers.
Stage 2: Association Establishment and Self-Regulatory Norms
The focus of the second stage is to promote the establishment of an association for VASPs and the formulation of self-regulatory norms. According to the schedule of the VASP association preparatory group, the association will be officially established tomorrow (13th) and will formulate industry self-regulatory norms based on the FSC’s guidelines.
Stage 3: Differentiated Management and Legal Strengthening
In the third stage, the FSC will add “VASP registration system” to the anti-money laundering law, clearly defining VASPs and imposing criminal penalties on illegal operators. VASPs that are currently operating without proper registration can face imprisonment of up to two years and a fine of up to NT$5 million.
Next, the FSC plans to implement differentiated management for registered VASPs based on the complexity of their operations. For example, exchange operators will need to comply with comprehensive internal control standards, including clear trading rules, compliance with ISO27001 information security requirements, requirements for the ratio of cold wallets in wallet management, and segregation of platform and client assets.
Stage 4: Enactment of the Special Act
The final stage is the enactment of the special act. In January of this year, the FSC commissioned a study on the establishment of a special act for managing VASPs, referring to regulations or recommendations from the European Union, Japan, South Korea, Hong Kong, the United Kingdom, the Financial Action Task Force (FATF), and the International Organization of Securities Commissions (IOSCO). The research team is expected to submit the final report by the end of September this year, and propose a draft of the special act and hold a public hearing before the end of the year, with the aim of submitting the draft to the Legislative Yuan before June 2025.
The goal of this stage is to establish a comprehensive legal framework covering licensing conditions, consumer protection, capital requirements, asset management, market trading behavior norms, and business development. These regulatory focuses will ensure that VASP operators can operate legally in Taiwan and prevent them from becoming fraudulent tools.
Taiwan’s Regulation of VASPs: Can Overseas Operators Still Escape?
Although Taiwan’s regulatory framework for cryptocurrency businesses is becoming clearer, VASPs that operate without proper registration can face imprisonment of up to two years and a fine of up to NT$5 million. However, it seems that overseas operators who are not registered still cannot be regulated.
Huang Tien-Mu emphasized that all cross-border operators should register and operate in Taiwan according to regulations and comply with anti-money laundering and anti-terrorism financing norms. However, due to the borderless nature of the internet, there are still challenges in supervision, and the FSC can only advocate and urge investors not to engage in such activities, while handling them through international cooperation.
In addition, the establishment of the VASP association, which will be launched tomorrow, is also one of the key concerns.
DPP legislator Guo Guo-Wen questioned that ACE Exchange and BitoPro Exchange, which were suspected of money laundering and fraud earlier this year, are still included in the list of 25 businesses announced by the FSC as passing the anti-money laundering evaluation. The process of formulating self-regulatory norms by the association may also lead to issues of insufficient self-regulation.
Huang Tien-Mu responded that the FSC has already formulated eight guiding principles based on international regulations, and after the association formulates self-regulatory norms within the framework of these principles, they will still need to submit an application to the competent authorities for review.
The Future and Challenges of VASP Regulation
The FSC’s series of plans reflect the increasing global importance of regulating virtual assets. In major financial systems such as the United States, the United Kingdom, Australia, South Korea, and Hong Kong, unlicensed or unregistered VASPs are subject to criminal liability. This strict regulatory strategy not only aims to prevent money laundering and fraud but also promotes the healthy development of the virtual asset market.
In the future, with clearer regulation of VASP industries, the virtual asset market is expected to become more regulated and transparent. This will also help increase consumer confidence and attract more legitimate and compliant operators to enter the market, thereby promoting overall economic development.
However, government strengthening of regulation also means that operators will have to bear greater compliance costs. This may also be a challenge for smaller-scale VASPs. The FSC’s differentiated management strategy aims to strike a balance between protecting consumers and promoting market innovation.
In the future, with the implementation of the special act, we can expect a more transparent and compliant virtual asset market, bringing greater benefits and opportunities to consumers and operators.