Taiwan has taken a significant stride in addressing the burgeoning virtual asset market through the introduction of a new legislative proposal known as the “Virtual Asset Management Regulations Draft.”
This bill marks a concerted effort to establish a comprehensive regulatory framework for the cryptocurrency industry, a timely response to the exponential growth of virtual assets within Taiwan.
The bill’s central objective is to institute a set of guidelines for virtual asset service providers, with a focus on safeguarding the interests of investors and promptly identifying and mitigating any potential risks to financial stability.
Notably, Taiwan’s existing regulatory landscape requires virtual asset service providers to adhere solely to anti-money laundering regulations, as introduced by the Financial Supervisory Commission (FSC) in July 2021.
Critics argue that the FSC’s regulatory measures have not kept pace with the industry’s rapid expansion, emphasising the need for updates.
The cryptocurrency sector in Taiwan remains predominantly unregulated, prompting lawmakers to advocate for a comprehensive regulatory framework in response to the sector’s continued growth.
The proposed legislation mandates that cryptocurrency platforms operating in Taiwan obtain a permit to continue their operations.
Non-compliance could trigger regulatory interventions, including potential suspension of operations.
The “Virtual Asset Management Regulations Draft” introduces a range of provisions designed to establish market order, enhance regulation, and protect investor rights, including:
– Definition of the scope of virtual assets and classification of operators
– Qualifications for leadership positions, permission procedures, and industry association requirements
– Mandates for participation in designated industry associations
– Rules governing the issuance of virtual assets and derivatives
– Requirements for the separation and retention of customer assets and records
– Policies related to customer data protection and custody disclosure
– Rules governing public virtual asset trading and customer protection
– Guidelines for transparent advertising and marketing practices
– Standards for information security and incident reporting
– Requirements for internal controls, audits, compliance, and risk management
– Standards for financial reporting and capital enforcement
– Regulatory penalties for non-compliance
– Mechanisms for resolving customer disputes and providing compensation
– Standards for maintaining information systems
While the precise timeline for the bill’s second reading remains uncertain, experts suggest that it may extend beyond January 2024, coinciding with the conclusion of the present legislators’ tenure in Taiwan.
Wayne Huang, co-founder and CEO of Taipei-based fintech XREX, said:
“Our next steps would be for the virtual asset service provider industry to collaborate with the FSC to define regulatory operations.”