Taiwan has taken a major step towards regulating its booming virtual asset market by introducing a new bill called the ‘Virtual Asset Management Regulations Draft’, which aims to create a comprehensive regulatory framework for the crypto industry .
The move comes as Taiwan struggles with the exponential growth of virtual assets in the country.
The primary purpose of the bill is to establish rules for providers of virtual asset services that ensure that investors are protected and that any risks to financial stability are quickly identified and addressed.
Current regime
Taiwan currently only requires virtual asset service providers to comply with anti-money laundering regulations, a guideline introduced by the Financial Supervisory Commission (FSC) in July 2021.
Critics argue that the FSC’s regulatory measures are lagging behind the industry’s growth and need to be updated. Virtual asset operators have continued to proliferate and their offerings have become more diversified, but the FSC’s primary focus is solely on anti-money laundering compliance.
The overall cryptocurrency sector remains largely unregulated and lawmakers believe the country needs a comprehensive regulatory framework for the fast-growing crypto industry.
According to the ‘Taiwan Blockchain Industry Map/Key Report’, the country was home to 200 domestic blockchain companies in August.
The bill
The proposed legislation will require cryptocurrency platforms in Taiwan to obtain a license to continue operating in the country, and non-compliance could result in regulatory intervention, including a possible suspension of operations.
While the timetable for the bill’s second reading remains uncertain, experts suggest it could last beyond January 2024, coinciding with the end of the terms of current lawmakers in Taiwan.
To establish market order, improve regulation and protect investors’ rights, Taiwan’s “Virtual Asset Management Regulations Draft” introduces provisions, including:
- Defining the scope of virtual assets and classifying operators.
- Qualifications for leadership roles, approval procedures, and industry association requirements.
- Mandatory participation in designated trade associations.
- Issuance rules for virtual assets and derivatives.
- Separation and retention registration of customer assets.
- Information about customer data protection and retention policies.
- Public rules for trading in virtual assets and customer protection measures.
- Transparent advertising and marketing practices.
- Information security standards and incident reporting.
- Internal controls, audit, compliance and risk management requirements.
- Financial reporting and capital maintenance standards.
- Regulatory penalties for non-compliance.
- Mechanisms for customer dispute resolution and compensation.
- Standardized maintenance of information systems.
This landmark legislation aims to stabilize Taiwan’s virtual asset market, boost investor confidence and encourage responsible growth of the sector.
While implementation challenges loom, the government’s proactive stance underlines its commitment to fostering a well-regulated virtual asset ecosystem.
