What happened?
Taiwan’s cryptocurrency regulation has entered its fourth phase. The draft law aims to establish a clear legal framework to regulate the establishment, operation, and management of VASPs, enhance consumer protection, and align with international regulatory trends.
The draft law covers nine key points to strengthen the management of VASP operators. These include regulations on operator licensing, capital requirements, internal control mechanisms, stablecoin issuance, transaction supervision, penalties, and more, in order to establish a safer, more transparent, and stable virtual asset market.
To implement the third-phase regulatory measures, the Financial Supervisory Commission (FSC) has introduced the VASP registration system and applies differentiated management based on the complexity of the businesses. Operators who fail to complete registration by the deadline will be prohibited from continuing operations and will face related criminal liabilities.
Virtual Asset Service Act Draft Released
In order to make Taiwan’s cryptocurrency and virtual asset market healthier and protect investors’ rights, the Financial Supervisory Commission (FSC) issued a press release on the 25th, officially announcing the release of the “Virtual Asset Service Act” draft.
This draft law was formulated by the FSC after referencing international standards and consulting domestic experts. It is expected to be submitted for review by the Executive Yuan by the end of June this year.
To improve the draft, the FSC will publish the content on its website and conduct a 60-day public consultation, inviting feedback from all sectors. The FSC emphasized that they will continue to communicate with all parties to ensure the law considers all perspectives.
Key Points of the Virtual Asset Service Act Draft
According to the FSC press release, the draft law covers nine main points and 50 articles, comprehensively regulating virtual asset service providers (VASPs).
- General Provisions: Clear legislative purposes, competent authorities, and definitions of relevant terms.
- Service Provider Licensing: Regulation of business types, licensing conditions, and capital requirements.
- Common Management: Including finance, internal controls, customer protection, and asset custody.
- Individual Service Provider Regulations: Specific regulations for exchanges, custodians, etc.
- Industry Associations: Regulations on their responsibilities, member obligations, and supervision by competent authorities.
- Stablecoin Management: Regulations on issuance licenses, termination, and issuer management.
- Transaction Service Supervision: Prohibition of fraud and manipulation, granting competent authorities inspection rights.
- Penalties for Violations: Specified criminal and administrative penalties.
- Transitional Provisions: Regulations on transitional arrangements and the implementation date.
Currently, Taiwan’s regulation of virtual asset service providers (VASPs) mainly follows the “Anti-Money Laundering Act,” requiring operators to submit anti-money laundering declarations and comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations.
However, the existing regulations focus primarily on anti-money laundering and lack specific regulations on virtual asset trading, custody, issuance, and other services. Additionally, the current regulations mainly address anti-money laundering and lack effective mechanisms for market manipulation and consumer protection.
Now, Taiwan has officially entered the fourth phase, and in order to fill the gaps in the current regulations, the FSC has introduced the “Virtual Asset Service Act” draft. Its primary goal is to establish a clear legal framework to regulate the establishment, operation, and management of virtual asset service providers, enhance consumer protection, and prevent market manipulation, fraud, and other improper activities.
Therefore, the draft law not only covers anti-money laundering but also establishes detailed regulations for virtual asset trading, custody, issuance, and other services. Virtual asset service providers must obtain licenses to operate and are subject to regulations on their capital, personnel qualifications, internal control mechanisms, etc.
At the same time, the draft law includes stablecoins under regulatory supervision, specifying the issuer’s qualifications, information disclosure obligations, and strengthening requirements for customer asset custody and information disclosure to protect consumers’ rights.
Operators Must Complete VASP Registration by the End of September
Taiwan’s regulation of VASP operators adopts a phased approach, which has now entered its fourth phase.
- Phase One (Anti-Money Laundering Regulation): Initially based on the “Anti-Money Laundering Act,” the “Anti-Money Laundering and Counter-Terrorist Financing Measures for Businesses or Individuals Providing Virtual Asset Services” was released in 2021, requiring VASPs to submit anti-money laundering declarations and comply with KYC/AML standards.
- Phase Two (Establishment of Associations and Self-Regulation): The FSC assisted VASPs in establishing industry associations and supervised the development of self-regulatory norms and internal control templates to enhance operators’ self-regulation capabilities.
- Phase Three (VASP Registration System): Based on the revised “Anti-Money Laundering Act,” the VASP registration system was implemented, requiring operators to complete registration to operate legally, with violators facing criminal penalties.
- Phase Four (Virtual Asset Special Law): The FSC is currently advancing the “Virtual Asset Service Act” legislation, aiming to establish a more comprehensive regulatory framework covering operator licensing, transaction regulations, consumer protection, and more.
Through these four phases, Taiwan is gradually strengthening its regulation of VASPs to effectively mitigate related risks while promoting the development of the industry.
Currently, the FSC is actively implementing the third-phase measures, pushing forward the VASP registration system. Differentiated management is applied to operators based on the complexity of their businesses.
However, as the deadline for cryptocurrency exchange license applications approaches, only 10 operators have applied, which is far below the 23 operators who previously submitted anti-money laundering declarations to the FSC.
The FSC’s Securities and Futures Bureau Secretary-General, Shang Guangqi, stated that among the applicants, six are new operators applying directly to the FSC, but currently, there are no foreign operators among the applicants.
With less than a week remaining before the March 31 application deadline, Shang Guangqi emphasized that operators who fail to submit applications will not be allowed to continue providing virtual asset services and will face criminal liabilities. The FSC will also update its official website to remove operators who have not submitted license applications.