Taiwan Lawmakers Propose Special Crypto Law to Prevent Regulatory Arbitrage
Taiwan lawmakers are planning to propose a draft special law by the end of November to address concerns about regulatory arbitrage in the crypto industry. Yung-Chang Chiang, a member of Taiwan’s parliament, argues that a dedicated crypto asset act is necessary to regulate crypto firms effectively. Chiang held a public hearing with virtual asset service providers and experts to discuss the draft proposal.
While Taiwan’s Financial Supervisory Commission (FSC) recently released guidelines for the crypto sector to form self-supervisory rules through a potential industry association, Chiang believes these measures lack legal enforceability. He emphasizes that a special law is needed to empower regulators to impose penalties on operators who violate self-regulation rules.
The proposed special law would require all crypto platforms in Taiwan to apply for a permit, and failure to do so could result in regulators ordering them to cease operations. Currently, virtual asset service providers in Taiwan must comply with anti-money laundering laws, but the crypto industry remains largely unregulated.
Struggling to Access Banking Services
Damien Ho, representative of global partnerships at Binance, highlighted the challenges faced by many crypto platforms in Taiwan when it comes to accessing suitable banking services. Despite the FSC’s efforts to mitigate risk perceptions, interactions with banks remain difficult. Ho suggests that the Taiwanese government encourage private or public banks to become more crypto-friendly and handle relevant business to promote regulated and effective development for crypto businesses.
Binance has applied for AML compliance registration in Taiwan but is not currently regulated in the country. The exchange has established a local entity named “Binance International Limited Taiwan Branch (Seychelles)” and received government approval for company registration in May 2023.
Regulating Crypto Platforms by Size
During the public hearing, Winston Hsiao, cofounder and Group CRO of Taipei-based crypto exchange XREX, emphasized the importance of compliance in the crypto industry but suggested a step-by-step approach to regulation. Hsiao proposed that small-scale entities be regulated by self-supervisory rules formulated by the industry association, while large-scale entities should obtain a permit under the special law and potentially apply for other relevant financial licenses.
Hot Take: Taiwan Aims to Strengthen Crypto Regulation with Special Law
Taiwan is taking proactive steps to enhance regulation in the crypto industry by proposing a special law. This law would provide legal enforceability and empower regulators to impose penalties on non-compliant operators. By requiring all crypto platforms to apply for permits, Taiwan aims to ensure regulatory oversight and prevent regulatory arbitrage. However, challenges persist, such as limited access to banking services for crypto platforms. The government and industry players must work together to create a more crypto-friendly environment that promotes regulated and effective development. The proposed special law is an important step towards achieving this goal.
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