On Tuesday, Taiwan’s Legislative Yuan approved the Virtual Asset Service Act after its third reading, marking the first comprehensive regulatory framework for the cryptocurrency sector on the island. The bill has been forwarded to President Lai Ching-te, who is anticipated to enact it within the next ten days.
This legislation establishes a licensing system for all virtual asset service providers in Taiwan, granting extensive regulatory authority to the Financial Supervisory Commission (FSC). According to this law, cryptocurrency enterprises must acquire FSC authorization prior to commencing operations in Taiwan. The framework encompasses seven types of providers, such as exchanges, trading platforms, transfer companies, custodians, underwriters, and lending services.
Additionally, the act introduces Taiwan’s inaugural stablecoin framework. Token issuers are required to obtain consent from both the central bank and the FSC before launching their tokens. The law mandates issuers to maintain complete reserves, deposit these reserves in trust, and comply with regular audits and public disclosures.
Issuance of domestic stablecoins is restricted to banking institutions, linking this nascent asset category closely to the country’s established financial entities.
Severe penalties for non-compliance
Severe consequences are in place for rule violations. Operating an unlicensed virtual asset service, or launching a stablecoin without the necessary approvals, could result in imprisonment for up to seven years and fines reaching NT$100 million ($3.14 million).
Offenses involving fraud and market manipulation could lead to sentences ranging from three to ten years, along with fines between NT$10 million and NT$200 million ($314,000 to $6.28 million).
To facilitate the transition, the FSC has established a grace period for firms that have completed anti-money laundering registrations prior to the law coming into effect. These companies are allowed a twelve-month period to submit their license applications and up to twenty-one months to achieve full compliance. The FSC has indicated the possibility of extending this grace period by an additional three months, as a one-time option.
This legislative action positions Taiwan alongside other regions that are shifting from fragmented guidelines to unified laws. Recent months have seen Kenya and Ghana approve their own virtual asset regulations, while lawmakers throughout Asia are actively formulating regulations pertaining to exchanges and stablecoin issuers.
Taiwan’s strategy combines opportunities for licensed operators with some of the most stringent criminal penalties in the region, a balancing act framed by regulators as a method to safeguard investors without hindering industry growth.
Taiwan’s growing acceptance of bitcoin and cryptocurrency
The passage of this act reflects a broader transformation in Taiwan’s perspective towards digital assets. The government recently revealed its possession of 210 bitcoins, approximated at nearly $18 million, and officials are contemplating plans to establish a strategic bitcoin reserve while exploring wider BTC regulations.
This new act solidifies that vision by legally stipulating who can operate within the market, under what conditions, and the repercussions for those who fail to comply.