Key Highlights
- Taiwan has passed the Virtual Asset Services Act, introducing a licensing regime for crypto firms.
- The FSC will supervise exchanges, custodians, lenders, and other virtual asset service providers.
- Existing crypto firms will be given 12 to 21 months to secure FSC licenses, or they may face penalties under the law.
After years of relying on baseline anti-money laundering (AML) rules to monitor and regulate cryptocurrency, Taiwan is adopting a broader regulatory framework for the sector. On June 30, the Legislative Yuan passed the third reading of the Virtual Asset Services Act, a licensing regime for crypto firms and rules for stablecoins and market conduct.
The newly enacted law brings all virtual asset service providers (VASPs) under the supervision of the Financial Supervisory Commission (FSC) and establishes requirements covering licensing, business operations, and market practices. The shift sets rigorous standards for operations, corporate governance, and consumer protection across the local market.
Strict requirements for crypto firms
The legislation separates crypto business activities into seven clear categories: digital asset exchanges, specialized trading platforms, transfer services, custodians, lenders, underwriters, and any other designated digital asset providers. Any corporate entity attempting to offer these services within the local market must secure formal, prior approval from the FSC before starting operations.
The law also lays out basic operating standards for these firms. This includes rules around governance, financial reporting, internal controls, cybersecurity, protection of customer assets, auditing, outsourcing, and listing or delisting of tokens. Furthermore, it sets strict professional qualification standards for all senior executives and board members.
Existing crypto firms already registered under Taiwan’s AML system will have time to adjust. They must apply for an FSC license within 12 months after the law takes effect and secure approval within 21 months. A one-time extension of up to three months may be granted if needed.
Tougher penalties for non-compliance
Until now, Taiwan’s crypto oversight mainly focused on AML compliance. The new law expands regulation by setting clearer standards for how crypto businesses operate and how they protect customer assets.
For this, it introduces stricter penalties for market misconduct, including fraud, deceptive practices, and price manipulation. Those found guilty could face prison terms of three to ten years, along with fines ranging from NT$10 million to NT$200 million, depending on the severity of the offence.
The Financial Supervisory Commission said it will continue working on detailed rules and consult with industry groups before the framework is fully implemented. The Executive Yuan will decide when the law comes into force.
New legal safeguards for stablecoins and derivatives
A major component of the legislation is the introduction of Taiwan’s first formal framework for stablecoins. Under the newly enacted rules, any institution wishing to issue a fiat-pegged token must secure joint approval from the FSC and the Central Bank of the Republic of China (Taiwan).
The law mandates that stablecoin issuers maintain 100% reserve asset backing, which must be held in segregated trust accounts within domestic financial institutions. To protect consumers, these reserves are legally insulated from corporate bankruptcy estates and are subject to mandatory independent audits.
In an unexpected expansion of the bill’s scope, lawmakers also passed a supplemental resolution directing the FSC to submit a comprehensive plan within one year outlining how the local crypto sector can safely introduce regulated digital asset derivative products.
What this means for local crypto firms
As the Executive Yuan prepares to announce the official date the law will take effect, crypto firms operating in Taiwan will need to transition from the current AML registration system to a full licensing regime once the law takes effect.
Companies will also have to meet new requirements covering governance, cybersecurity, financial reporting, customer asset protection, and internal controls. Firms that continue operating without the required license after the transition period could face penalties under the new law.
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