Rumors of Virtual Asset Trading Requiring Financial Flow Tracking Trigger Market Panic
Today, a piece of news stating that “all virtual currency operators in Taiwan will cease their TWD cash operations” rapidly spread online, causing panic among investors. Starting from May 7, all virtual currency operators in Taiwan may cease TWD cash operations, meaning that no one will be allowed to buy and sell cryptocurrencies in the over-the-counter market with New Taiwan Dollar cash.
This news has led to outcries on social media: “Is this really happening?” and “What will happen to Taiwanese exchanges?” According to Crypto City, after verification with relevant authorities, this news originates from a letter issued by the Securities and Futures Bureau on May 7, with the subject line “To Ensure Financial Flow Transparency and Traceability,” requiring VASP operators to conduct transactions with customers in a manner that allows for retaining financial flow traces.
The letter points out that conducting virtual asset transactions in cash will make it difficult to track the flow of funds and could easily create financial flow breakpoints. To prevent ill-intentioned individuals from using cash transactions as a cover for money laundering and fraud, operators are required not to accept cash transactions for virtual assets, but to adopt methods that allow for retaining financial flow traces.
Expert Interpretation: Not a Complete Ban on Cash Transactions, Mainly Targeting OTC Transactions
Regarding this new regulation, Crypto City consulted lawyer Zheng Xuefeng, founder of Mu Zhang Management Consulting. The lawyer pointed out that the wording in the letter does not completely ban cash transactions but uses the expression “should adopt methods that allow for retaining financial flow traces,” leaving room for interpretation. According to Article 7 of the “Self-Regulatory Guidelines for Banks and Virtual Currency Platforms and Transaction Business Establishing Business Relationships and Transaction Monitoring,” banks may, based on risk assessment methods, allow cash payments within a certain limit, processed by convenience stores.
Self-Regulation Guidelines for VASP Operators
The editor of Crypto City stated that the inflow and outflow of funds for exchanges, due to normal financial flow, are not within the scope of this regulation; however, OTC (over-the-counter) transactions or purchasing in-store with cash may be affected. He believes that this move primarily targets exchanges and coin dealers, as convenience stores generally have financial flow records under normal circumstances. Experts generally believe that this measure is mainly to prevent money laundering and fraud, as fraud cases are rampant in Taiwan, and the government is particularly focused on financial flow control.
Lawyer Zheng Xuefeng further stated that the government’s consideration is not tax revenue but the underground financial flow issues that have been discovered, which have exceeded the burden, saying, “Not only is it dangerous, but it has already caused real harm and completion.”
VASP Operators Facing Pressure to Transform, Several Coin Dealers Announce Market Exit
Against the backdrop of tightening regulations on virtual assets in Taiwan, several VASP operators have announced their exit from the market.
On May 10, Taiwanese coin dealer BitAsset (Asia-Pacific Easy Ant Technology Co., Ltd.) announced on Facebook that it would completely cease virtual currency trading operations. On May 12, Coin-Now Bitcoin Exchange (Yangjia Co., Ltd.) also announced its official closure at 18:00 on that day, citing “due to overall environmental changes and operational strategy adjustments.” Additionally, in the latest list of VASP operators released by the Financial Supervisory Commission, Taiwanese coin dealers BitShine and CoinWorld have also disappeared. BitShine was previously suspected by the police of laundering money for fraud groups, with monthly cash flows reaching billions; CoinWorld stated that it voluntarily applied to withdraw from the money laundering prevention law compliance list and had ceased virtual currency trading operations on May 1.
With the “Virtual Asset Service Act” draft set to be submitted to the Executive Yuan in June, and the Financial Supervisory Commission requiring VASP operators to complete legal registration by the end of September 2025, the Taiwanese crypto industry is at a critical transformation stage. According to the data from the Securities and Futures Bureau of the Financial Supervisory Commission, as of July 2024, 26 operators had completed their money laundering prevention law compliance declarations, and by May 8, 2025, only 19 remained. If excluding the operators that have recently exited the market, only 17 may actually remain.
The editor of Crypto City stated: “Referring to past scenarios faced by innovations like Open Banking and IoT, ultimately, the compliant VASP operators may only number between 4 to 7.”
It is noteworthy that the Financial Supervisory Commission will launch the largest VASP financial inspection action this year, targeting 12 Taiwanese crypto platforms that have not yet been inspected. During the financial inspections between 2023 and 2024, all 10 platforms had multiple deficiencies, including failing to conduct customer reviews as required and not understanding the purpose and nature of customer business relationship establishment. Well-known Taiwanese platforms such as MaiCoin, Bito, ACE, and Rybit have all been fined, among which ACE and Rybit are no longer on the Financial Supervisory Commission’s money laundering prevention list.
Considerations Behind Stricter Regulations: Enhancing Financial Flow Transparency and Protecting Investor Rights
The Financial Supervisory Commission’s strengthening of regulations reflects a shift in the government’s attitude toward the virtual asset market. It is understood that the government and the Financial Supervisory Commission prefer that operators providing virtual asset services be registered and operated by financial institutions (such as banks) or financial holding companies. The rationale is that if any financial losses or illegal incidents occur in the future, at least these institutions have the financial capacity to compensate victims.
Lawyer Zheng Xuefeng pointed out that the licenses for virtual asset operators are government-backed, so regulation must be strict. He stated: “The various processes that startups must go through always involve a phase of wild growth, after which the government comes in to clean up the battlefield.” The editor of Crypto City also noted: “As netizens in the crypto community often sarcastically point out, the entire crypto industry is a huge makeshift stage; although not all VASP operators have specialized internal control teams, as regulatory thresholds rise, operators that do not meet standards or lack long-term operational capabilities may gradually be eliminated, leaving market space for more capable and compliant enterprises.”
For Taiwanese investors, this market after the period of growing pains will provide more legal protections, reduce systemic risks, and contribute to the healthy development and social acceptance of crypto assets as an emerging investment category. Although it may cause market volatility and investor anxiety in the short term, in the long run, establishing a transparent and compliant trading environment is the only way to truly promote the steady growth of the virtual asset market.
This article is collaboratively reprinted from: Crypto City