In a significant move aimed at regulating the fast-growing cryptocurrency market, Taiwan’s Financial Supervisory Commission (FSC) has announced new measures requiring all virtual asset service providers (VASPs) to register with the regulatory body by September 2025. The new regulations come as part of a broader effort to tighten controls on the industry, particularly in the areas of anti-money laundering (AML) and customer protection.
Failure to comply with the registration deadline could result in severe penalties. VASPs face potential imprisonment of up to two years and fines reaching NT$5 million (approximately $155,000), according to a report by Radio Taiwan International.
Strengthened Regulatory Framework
The new AML regulations, which are currently in draft form, are expected to come into effect on January 1, 2025. These rules aim to enhance the regulatory oversight of cryptocurrency-related businesses and mitigate risks tied to illicit activities, such as money laundering and terrorism financing. The revised framework will require VASPs to meet capital requirements, implement robust customer protection measures, and ensure that management teams possess relevant professional qualifications, including a clean criminal record.
The regulations signal a more stringent approach from Taiwanese authorities, marking a shift from the country’s previous regulatory efforts, which already included AML rules introduced in July 2021. Even firms that fully complied with the earlier regulations will now need to re-register with the FSC to avoid sanctions.
Special Cryptocurrency Law on the Horizon
In addition to the registration mandate, the FSC is drafting a special law specifically for cryptocurrencies, aimed at providing a comprehensive legal framework for the industry. The proposed law is being developed by drawing on best practices from other jurisdictions, including the European Union, Japan, Hong Kong, the United Kingdom, and South Korea. The draft is scheduled to be released in June 2025, with plans for approval by the Executive Yuan, Taiwan’s executive branch.
This upcoming legislation is expected to address various aspects of the crypto market, further tightening oversight while also fostering innovation within the sector.
Global Trends and Local Context
Taiwan’s regulatory approach mirrors a global trend towards increased scrutiny of digital assets. Countries around the world have been grappling with the challenges of regulating the rapidly evolving cryptocurrency market, balancing the need to protect consumers while promoting technological advancements. Taiwan’s stance reflects both its concerns over the speculative nature of cryptocurrencies and its recognition of the importance of regulatory clarity to drive innovation in financial technologies.
The new regulations align with international standards aimed at combating money laundering and terrorist financing in the cryptocurrency sector. By introducing clear rules around registration, capital requirements, and customer protection, the FSC aims to bolster transparency, mitigate risks, and safeguard investors in an increasingly volatile market.
Recent Developments in Taiwan’s Crypto Market
While the new regulations represent a notable shift towards stricter oversight, Taiwan has also shown some flexibility in other areas of its crypto policy. In recent months, the government has allowed institutional investors and high-net-worth individuals to trade in foreign cryptocurrency exchange-traded funds (ETFs), although with certain restrictions.
However, Taiwan’s financial regulators continue to maintain a cautious view of cryptocurrencies. In March 2024, FSC Chairman Huang Tianmu reiterated the speculative nature of virtual assets and the risks they pose due to their lack of intrinsic value. He stressed the importance of careful regulation to prevent these risks from destabilizing the financial system.
As Taiwan works to implement these regulatory changes, its evolving approach to cryptocurrencies will likely serve as a model for other countries seeking to navigate the complexities of this emerging market. By establishing a clear and enforceable framework, Taiwan aims to protect consumers, mitigate financial risks, and ensure the healthy development of its digital asset sector.
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