As virtual assets continue to rapidly rise globally, effective regulation has become an important issue for governments and financial regulatory agencies around the world. Due to the anonymity and cross-border nature of virtual asset transactions, potential money laundering and fraud risks have attracted widespread attention from Taiwan’s Financial Supervisory Commission (FSC), which has begun researching the possibility of enacting a special law.
FSC Chairman, Huang Tien-mu, will report on the “Virtual Asset Special Law Development Process” to the Finance Committee today. From the written report submitted to the Finance Committee yesterday, it can be seen that the regulatory development of the cryptocurrency industry will be divided into four stages, ultimately leading to the establishment of a special law. This is also the first time that the FSC has publicly revealed the schedule for the enactment of the cryptocurrency law.
The first stage: Regulating VASP operators
The first stage will start with anti-money laundering regulations and will begin regulating “Taiwan virtual asset platform and trading business operators” (VASP) operators. According to information on the FSC’s official website, a total of 25 encryption operators have completed their compliance statements, including exchanges, trading platforms, physical stores, virtual asset automatic teller machines (BTMs), and custody system providers.
The second stage: Association and self-regulation
The focus of the second stage is to promote the establishment of a VASP association and the formulation of self-regulatory norms. According to the VASP Association Preparatory Group’s schedule, the association will be officially established tomorrow (13th), and will formulate industry self-regulatory norms based on the guiding principles set by the FSC.
The third stage: Differentiated management and legal strengthening
In the third stage, the FSC will add the “VASP registration system” to the anti-money laundering law, clearly defining VASP and imposing criminal penalties on illegal operators. VASP operators who engage in business without registration as required can be sentenced to up to two years in prison and fined up to NT$5 million.
Next, the FSC plans to differentially manage registered VASP operators according to the complexity of their business in subsidiary laws. For example, operators of exchange-type businesses must comply with the most complete internal control regulations, including clear trading rules, compliance with ISO27001 information security requirements, cold wallet ratio requirements for wallet management, and separation of platform and customer assets.
The fourth stage: Enactment of the special law
The final stage is the establishment of a special law. In January of this year, the FSC commissioned a study on the establishment of a VASP management special law and referred to regulations or recommendations from the European Union, Japan, South Korea, Hong Kong, the United Kingdom, the Financial Action Task Force (FATF), and the International Organization of Securities Commissions (IOSCO). The research team is expected to submit a final report by the end of September this year, and to submit a draft law and hold a public hearing before the end of the year. The draft law is expected to be submitted to the Legislative Yuan before June 2025.
The goal of this stage is to establish a comprehensive legal framework covering operator licensing conditions, consumer protection, capital requirements, asset management, market trading behavior norms, and business development. These regulatory focuses will ensure that VASP operators can operate legally in Taiwan in the future and avoid becoming fraudulent tools.
Taiwan’s regulation of VASP, overseas operators still cannot be regulated?
Although Taiwan’s regulatory framework for encryption operators is becoming clearer, VASP operators who engage in business without registration as required can be sentenced to up to two years in prison and fined up to NT$5 million. However, it seems that overseas operators who are not registered are still unregulated.
Huang Tien-mu emphasized that all cross-border operators should register and land in Taiwan according to regulations, and comply with anti-money laundering and anti-terrorism financing regulations. However, due to the boundless nature of the internet, there are still difficulties in supervision, and the FSC can only promote and appeal to investors not to do so, and handle it through cross-border cooperation.
In addition, the establishment of the VASP Association tomorrow is also one of the key points of concern.
The FSC’s series of plans reflect the increasing global attention to the regulation of virtual assets. In major financial systems such as the United States, the United Kingdom, Australia, South Korea, and Hong Kong, unlicensed or unregistered VASP operators are subject to criminal liability. This strict regulatory strategy not only prevents money laundering and fraud, but also promotes the healthy development of the virtual asset market.
In the future, with the regulation of the VASP industry becoming clearer, it is expected that the virtual asset market will become more regulated and transparent. This will also help increase consumer confidence, attract more legal and compliant operators to enter the market, and promote the overall development of the economy.
However, government strengthening of regulation also means that operators need to bear greater compliance costs. For smaller VASP operators, this may also be a challenge. The FSC’s differentiated management strategy is precisely to strike a balance between protecting consumers and promoting market innovation.
In the future, with the implementation of the special law, we have reason to expect a more transparent and compliant virtual asset market, bringing greater benefits and opportunities to consumers and operators.