The Virtual Asset Management Bill: Strengthening Crypto Regulation in Taiwan
In an effort to provide increased customer protection and proper supervision for the growing crypto industry, legislators in Taiwan have introduced the Virtual Asset Management Bill. The bill, which was presented to the country’s unicameral parliament on October 25, aims to categorize virtual assets and establish operational guidelines for exchanges.
Taiwan has traditionally taken a hands-off approach to crypto regulation, but that changed after the collapse of popular exchange FTX last year. The new legislation seeks to clarify the definition of virtual assets, enhance consumer safeguards, and require participation in industry associations and regulatory approvals.
Operational Requirements and Penalties
The Virtual Asset Management Bill takes a different approach from Hong Kong by not explicitly addressing derivatives or stablecoins. However, it acknowledges that derivatives linked to virtual assets may require specific regulations in the future. The bill also does not mandate the use of custodians for licensed exchanges, but it requires the separation of customer assets from business funds.
Under the proposed legislation, fines would be imposed on Virtual Asset Service Providers (VASPs) operating without a license. Companies already active in Taiwan would have six months to obtain a license once the bill is enacted.
Taiwan’s Focus on Offshore Concerns and Regulation
The Virtual Asset Management Bill also aims to address concerns about offshore market activities and prevent regulatory arbitrage. It recognizes that crypto assets are different from traditional financial products and require unique regulations. In September 2023, Taiwan’s Financial Supervisory Commission released industry guidelines for VASPs, prohibiting foreign providers from offering services without regulatory approval.
To support the industry and facilitate communication with regulators, major Taiwanese cryptocurrency exchanges have formed a self-regulatory association. The timeline for the bill’s second reading is yet to be determined but is expected to take place in January 2024.
Hot Take: Taiwan Strengthens Crypto Regulations with Virtual Asset Management Bill
Taiwan’s introduction of the Virtual Asset Management Bill marks a significant step towards enhanced regulation and customer protection in the country’s crypto industry. By establishing operational guidelines and clarifying the definition of virtual assets, the bill aims to ensure proper supervision and prevent regulatory arbitrage. The legislation diverges from neighboring Hong Kong by not taking a solid stance on derivatives or stablecoins, leaving room for future regulations in those areas. With fines for unlicensed operators and requirements for separation of customer assets, Taiwan is taking proactive measures to promote compliance and safeguard investors. As the bill progresses through the legislative process, it is expected to further solidify Taiwan’s position as a crypto-friendly jurisdiction with robust regulatory frameworks.
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