Taiwan's Crypto Law Just Dropped — And Yes, Stablecoins Now Have to Ask Permission 🪙

Taiwan's Legislative Yuan passed the Virtual Asset Service Act on June 30, establishing the country's first comprehensive regulatory framework for crypto and stablecoins. The bill, approved on its third reading, requires all virtual asset service providers to obtain a license from the Financial Supervisory Commission (FSC) to operate, moving oversight beyond the previous narrow focus on anti-money laundering.

The law defines seven categories of VASPs, including exchanges, trading platform operators, transfer service providers, custodians, underwriters, lending service providers and other virtual asset service providers. All licensed entities will be subject to internal control, audit, cybersecurity, customer asset segregation and financial reporting requirements. VASPs that completed AML registration before the law takes effect, as well as financial institutions already providing related services under the FSC, must apply for a license within 12 months of implementation and obtain full regulatory approval and an operating license within 21 months, with a possible three-month extension.

Stablecoin issuance is regulated under the same framework. Issuers must obtain approval from both the Central Bank of the Republic of China (Taiwan) and authorization from the FSC, maintain full reserve backing for outstanding stablecoins, place reserve assets in trust, undergo regular audits and comply with periodic disclosure requirements. "At the same time, issuing stablecoins within the Republic of China will help Taiwan align with international standards and secure a place in the global virtual asset market, greatly benefiting the long-term, sound development of Taiwan's virtual asset market," the FSC said in a press release.

Penalties for misconduct are severe. Fraud or price manipulation carries a prison sentence of three to ten years and fines ranging from NT$10 million to NT$200 million (US$314,000 to US$6.3 million), according to Taiwan's national news agency CNA. Operating an unlicensed VASP or issuing an unauthorized stablecoin carries up to seven years in prison and fines of up to NT$100 million (US$3.1 million). The law also outlaws crypto-based fraud and price manipulation.

The implementation date will be determined by the Executive Yuan after the legislation is published by the executive branch. Lawmakers also passed a resolution directing the FSC to propose a plan within one year outlining how the industry can offer derivative crypto commodity services, with the stated aim of providing diversified investments and improving the sector's health.