Title: Taiwan Announces Comprehensive Timeline for Virtual Asset Special Legislation
As virtual assets rapidly gain prominence worldwide, effective regulation has become a crucial focus for governments and financial regulators globally. Concerns over potential money laundering and fraud risks arising from the anonymity and cross-border nature of virtual asset transactions have prompted Taiwan’s Financial Supervisory Commission (FSC) to undertake a detailed study on the possibility of enacting specialized legislation.
FSC Chairman, Mr. Huang Chiung-lung, is scheduled to present the “Virtual Asset Special Legislation Development Process” to the Legislative Yuan’s Finance Committee today. The written report submitted on the previous day outlines a phased approach towards regulatory development within the cryptocurrency industry, culminating in the establishment of specialized legislation. This marks the FSC’s first public disclosure of the timeline for crypto-specific legislation.
Phase One: Regulation of VASP Operators
The initial phase focuses on anti-money laundering regulations, starting with the supervision of “Taiwan Virtual Asset Service Providers” (VASPs). According to information from the FSC’s official website, 25 cryptocurrency entities have already completed compliance declarations, including exchanges, trading platforms, physical stores, Bitcoin ATMs (BTMs), and custodial system providers.
Phase Two: Guilds and Self-Regulation
Phase two emphasizes the establishment of a VASP guild and the formulation of self-regulatory norms. As per the timetable set by the VASP Guild Preparation Team, the guild is slated to be officially established tomorrow and will develop industry self-regulations based on FSC guidelines.
Phase Three: Differentiated Management and Legal Strengthening
In the third phase, the FSC plans to introduce a “VASP Registration System” under anti-money laundering laws, clearly defining VASP and imposing criminal penalties on unauthorized operators. VASPs conducting business without proper registration may face imprisonment of up to two years and a fine of up to 5 million NT dollars. The FSC also plans to implement differentiated management of registered VASPs based on the complexity of their operations.
For instance, exchange operators will be required to adhere to comprehensive internal control standards, including explicit trading rules, compliance with ISO27001 cybersecurity requirements, cold wallet ratio requirements for wallet management, and segregation of platform and customer assets.
Phase Four: Enactment of Special Legislation
The final phase involves the enactment of specialized legislation. In January of this year, the FSC commissioned external research on establishing specialized legislation for VASPs, drawing on standards or recommendations from the EU, Japan, South Korea, Hong Kong, the UK, the Financial Action Task Force (FATF), and the International Organization of Securities Commissions (IOSCO). The research team is expected to submit its final report by the end of September this year and propose a draft law by the end of the year, with a public hearing scheduled before June 2025.
This phase aims to establish a comprehensive legal framework covering operator licensing conditions, consumer protection, capital requirements, asset management, market conduct norms, and business development. These regulatory priorities are designed to ensure that VASP operators can legally operate in Taiwan in the future without becoming vehicles for fraud.
Challenges in Overseas VASP Regulation
While Taiwan’s regulatory framework for cryptocurrency operators is becoming clearer, there remain challenges in regulating overseas entities that operate without proper registration. Chairman Huang emphasized that all cross-border operators must comply with Taiwanese regulations, including anti-money laundering and counter-terrorism financing norms. However, due to the borderless nature of the internet, enforcement remains challenging, and the FSC can only advocate and cooperate internationally to address these issues.
Furthermore, the establishment of the VASP guild tomorrow is also a focal point of attention.
Future Prospects and Challenges in VASP Regulation
The FSC’s initiatives reflect a growing global emphasis on regulating virtual assets. Major financial systems in the US, UK, Australia, South Korea, and Hong Kong impose criminal liability on unlicensed or unregistered VASPs to prevent money laundering and fraud, thereby promoting a healthier development of the virtual asset market.
As VASP industry regulation becomes clearer, the virtual asset market is expected to become more standardized and transparent in the future. This regulatory clarity will enhance consumer confidence, attract more legal and compliant operators to enter the market, and promote overall economic development.
However, intensified government regulation also means increased compliance costs for operators, posing challenges particularly for smaller-scale VASP operators. The FSC’s strategy of differentiated management aims to strike a balance between consumer protection and market innovation.
Looking ahead, with the implementation of specialized legislation, we can anticipate a more transparent and compliant virtual asset market, offering greater benefits and opportunities for both consumers and operators alike.
