On October 25th, Taiwanese legislators made a significant move towards regulation in the cryptocurrency industry, introducing the Virtual Asset Management Bill to the country’s legislative parliament, the Legislative Yuan. The purpose of this bill is to enhance customer protection and ensure proper oversight of the virtual asset service providers (VASPs) in Taiwan.
Spanning across 30 pages, the bill lays out a series of obligations for VASPs in the country. These obligations include the requirement to separate customer funds from the company’s reserve funds, establishing an internal control and audit system, and joining a local trade association. These measures aim to provide a level of security and accountability within the industry.
It is worth noting that the bill currently does not mandate stablecoin issuers to maintain a 1:1 ratio of reserve funds. This means that stablecoin issuers are not required to hold an equal amount of reserves for the tokens they issue. Additionally, the bill does not address the use of algorithmic stablecoins, which have gained popularity in recent times. This omission leaves room for further development and refinement in future versions of the bill.
Another aspect that remains to be determined is the regulations around marketing activities in the industry. The bill grants the “competent authority” the power to set rules for advertising, further emphasizing the aim to provide proper supervision of the industry.
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To ensure compliance, the bill proposes penalties for VASPs operating without a license. These penalties include fines ranging from a minimum of 2 million Taiwanese dollars (approximately $60,000) to a maximum of 20 million TWD ($600,000). Companies that are already operating in Taiwan will have a six-month grace period to obtain the necessary license once the bill is enacted.
This recent legislative effort follows the industry guidelines for VASPs released by Taiwan’s Financial Supervisory Commission (FSC) in September 2023. In these guidelines, the FSC explicitly prohibits foreign VASPs from offering their services in Taiwan without obtaining the required approvals from the regulator. This move by the FSC is significant as it ensures tighter control over the industry and protects consumers from potentially unregulated and risky service providers.
Notably, major cryptocurrency exchanges in Taiwan have taken steps towards self-regulation by forming an association dedicated to promoting best practices in the industry. The Taiwan Virtual Asset Platform and Transaction Business Association was created on September 26th and includes exchanges such as MaiCoin, BitstreetX, Hoya Bit, Bitgin, Rybit, Xrex, and Shangbito. The association aims to collaborate with regulatory bodies to support the growth and development of the crypto industry in Taiwan.
While the Virtual Asset Management Bill and industry guidelines for VASPs lay the foundation for regulation in Taiwan, it is essential to acknowledge that the cryptocurrency industry is ever-evolving. As new technological advancements and financial instruments emerge, it is crucial for regulators to continuously review and update regulations to ensure they remain effective and relevant.
In conclusion, the introduction of the Virtual Asset Management Bill in Taiwan marks a significant step towards the regulation of the cryptocurrency industry in the country. The bill aims to provide better protection for customers and establish proper supervision of virtual asset service providers. By enforcing obligations and penalties, the bill seeks to ensure compliance and enhance accountability within the industry. Combined with the industry guidelines set by the Financial Supervisory Commission, Taiwan is making strides towards creating a secure and thriving cryptocurrency ecosystem. As the industry continues to evolve, it remains essential for regulators to adapt and refine regulations to keep pace with technological advancements and market developments.
