Taipei: The Legislature has passed a law that establishes a regulatory framework for cryptocurrency businesses in Taiwan. This new law includes licensing requirements for virtual asset service providers (VASPs) and stablecoin issuers, as well as penalties for fraud and market manipulation.
According to Focus Taiwan, the act mandates that VASPs must secure approval from the Financial Supervisory Commission (FSC) before commencing operations. They must also adhere to requirements concerning internal controls, cybersecurity, and business continuity. Existing VASPs that have already completed anti-money laundering registration will have a 12-month window to apply for licenses and a 21-month period to obtain regulatory approval.
The act, proposed by the Cabinet on April 2, introduces Taiwan's first legal framework for stablecoins, which are virtual assets pegged to one or more fiat currencies. Stablecoin issuers are required to maintain full reserve backing, with segregated reserve assets held in trust by domestic financial institutions. These reserve assets will be protected from other creditors' claims in the event of the issuer's bankruptcy.
Issuers are also required to undergo regular audits and are prohibited from paying interest or other returns to holders. Operating a VASP or issuing stablecoins without legal authorization carries a penalty of up to seven years in prison and a fine of up to NT$100 million (US$3.14 million).
The act further stipulates that fraud or manipulation of virtual asset prices or the supply and demand of these assets is punishable by three to 10 years in prison, along with fines ranging from NT$10 million to NT$200 million. Lawmakers have also adopted a nonbinding resolution urging the FSC to present a plan within one year that will allow virtual asset firms to offer cryptocurrency derivatives.