Taiwan Just Gave Crypto the Rulebook It Always Wanted 🪪

Taiwan's Legislative Yuan passed the Virtual Asset Service Act on its third reading on June 30, moving the island's oversight of virtual asset service providers from anti-money-laundering registration to full operational and market-conduct supervision. The Financial Supervisory Commission said the framework defines seven categories of virtual asset service providers (VASPs): exchanges, trading platform operators, transfer service providers, custodians, underwriters, lending service providers, and a catch-all category for other virtual asset services. The bill now heads to President Lai Ching-te, who is expected to promulgate it within 10 days, after which the Executive Yuan will set an effective date. The FSC said the law will take effect after publication by the executive branch.

VASPs will be required to meet standards on personnel fitness, internal controls and audits, cybersecurity, listing and delisting processes, customer asset segregation, financial reporting and civil liability toward clients, including for outsourced work. Crypto-based fraud and price manipulation carry prison terms of three to 10 years and fines ranging from NT$10 million to NT$200 million ($314,000 to $6.3 million). Operating a VASP or issuing a stablecoin without a license can bring up to seven years in prison and fines of up to NT$100 million ($3.1 million). The law requires virtual asset firms to obtain approval from the FSC to operate.

Stablecoin issuers face additional requirements. Entities issuing stablecoins in Taiwan must obtain approval from the Central Bank of the Republic of China (Taiwan) and authorization from the FSC, maintain full reserve backing for all issued stablecoins, place reserve assets in trust, undergo regular audits and comply with periodic information 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.

Existing VASPs that completed anti-money laundering registration before the law takes effect, along with financial institutions already providing virtual asset services under FSC regulations, must apply for an FSC license within 12 months of the Act's implementation and obtain full regulatory approval and an operating license within 21 months. The licensing deadline may be extended once by up to three additional months if necessary, with non-compliant operators barred from continuing business.

Lawmakers also passed a separate resolution asking the FSC to propose a plan within one year outlining how the crypto industry can provide derivative crypto commodity services. Taiwan's move places it alongside Japan, Singapore, Hong Kong and the European Union under its MiCA regime, jurisdictions that have already established comprehensive crypto oversight frameworks to attract industry participants. The FSC said it will now draft the secondary rules needed to put the regime into practice, working with industry associations and other stakeholders.