Taiwan is enacting digital asset regulations by introducing the Virtual Asset Management Ordinance Draft to the Legislative Yuan.
This bill aims to clarify what virtual assets are, establish rules for companies that handle these assets, protect customers, and require these companies to be part of industry groups and get regulatory approval.
As for when the bill will go through its second reading, there isn’t a set timeline, and it might not happen before January 2024. This is because the current term of all lawmakers in Taiwan comes to an end in January next year.
Until now, Taiwan has been fairly hands-off in its approach to the digital asset industry, only applying existing laws related to customer identification and anti-money laundering.
However, they decided to speed up the process of regulating the industry after a popular crypto exchange called FTX collapsed in November. Many people in Taiwan had used FTX because it offered better U.S. dollar interest rates compared to local banks.
Chiang and 16 other lawmakers have proposed a special cryptocurrency law in Taiwan which would make it necessary for all cryptocurrency platforms in Taiwan to request a permit. If they don’t obey, regulators would have the authority to instruct them to stop their operations.
Yung-Chang Chiang, a member of the Legislative Yuan who jointly proposed the special act, said, “After the first reading of the bill, discussions on the regulatory framework for the virtual asset industry have progressed to the next stage.”
In contrast to crypto regulations in nearby Hong Kong, the proposed bill does not strongly advocate for specific rules regarding cryptocurrency derivatives or stablecoins.
However, it does recognize that derivatives connected to virtual assets, such as perpetual contracts, have unique features that don’t entirely match conventional financial regulations. This acknowledgment leaves room for potential future regulations focused on crypto derivatives.
The bill also doesn’t limit the trading of virtual assets to professional investors only, unlike some other countries like Japan.
In Japan, there is a requirement for locally licensed cryptocurrency exchanges to use custodians, but the draft bill only insists on keeping customer assets separate from business funds. It doesn’t explicitly mandate the use of third-party custodians.