Key Takeaways
- The bill introduces penalties for Virtual Asset Service Providers (VASPs) operating without a license.
- Legislation aims to establish a framework for overseeing the digital asset industry,
Taiwan has taken a significant step towards regulating digital assets by presenting its inaugural Virtual Asset Management Bill to the Legislative Yuan for its initial review.
This legislation aims to establish a framework for overseeing the digital asset industry, emphasizing consumer protection and operational standards for asset operators, while also mandating industry membership and regulatory approvals.
The Virtual Asset Management Bill which was introduced to the legislative parliament on October 25 does not currently enforce a 1:1 reserve fund requirement for stablecoin issuers, and it remains silent on algorithmic stablecoins. Additionally, advertising rules are to be determined by the competent authority.
The bill introduces penalties for Virtual Asset Service Providers (VASPs) operating without a license. These fines range from a minimum of TWD 2 million (approximately $60,000) to a maximum of TWD 20 million ($600,000).
Existing companies operating in the Taiwanese market will have a six-month grace period to obtain a license once the bill becomes effective.
In a related development, the Financial Supervisory Commission (FSC) of Taiwan issued industry guidelines for VASPs in September 2023, which also require foreign VASPs to obtain regulatory approvals before offering services in Taiwan.
Taiwan’s cryptocurrency industry has been actively engaging in self-regulation. A consortium of major cryptocurrency exchanges in the country formed the Taiwan Virtual Asset Platform and Transaction Business Association on September 26.
This association, which includes Maicoin, BitstreetX, Hoya Bit, Bitgin, Rybit, Xrex, and Shangbito, is dedicated to supporting the crypto sector and collaborating closely with regulatory bodies.
The Virtual Asset Management Bill spans 30 pages and appears to strike a balance in its requirements for the digital asset industry. It mandates practical obligations for VASPs, such as segregating customer funds from company reserves, implementing internal control and audit systems, and joining local trade associations.
Unlike neighboring Hong Kong, this bill refrains from taking a strong position on derivatives and stablecoins. However, it acknowledges the distinctive characteristics of virtual asset-related derivatives, including perpetual contracts, which may warrant dedicated regulatory measures in future drafts.
Crucially, the bill maintains an inclusive approach, not limiting virtual asset trading to professional investors.
