According to a local report, the Republic of China (Taiwan) is set to announce its official guidelines for regulating virtual asset service providers (VASPs) by the end of this month. The guidelines will cover key aspects such as anti-money laundering, asset custody, transaction transparency, and platform management.
FSC to Supervise Crypto Industry in Taiwan
The Financial Supervisory Commission (FSC) of Taiwan will be the competent authority for overseeing the crypto industry in the island country, as decided by the government in March 2023.
The FSC will issue the “Guiding Principles for the Management of Virtual Asset Platforms and Trading Businesses” before the end of September, based on the regulations in European Union nations, Singapore, and Japan.
The FSC will require VASPs to comply with 10 guiding principles, which include:
- Strengthening the management of virtual asset issuance, such as conducting due diligence on issuers and disclosing relevant information to investors.
- Establishing a review mechanism for listing and delisting of virtual assets, such as setting criteria and procedures for adding or removing assets from trading platforms.
- Oversight on separation of platform assets and customer assets, such as ensuring that VASPs keep their own funds and customers’ funds in separate accounts and wallets.
- Ensuring transaction fairness and transparency, such as providing clear and accurate information on trading fees, order books, and market data.
- Strengthening contract formulation, advertising solicitation, and complaint handling, such as using standard contracts, disclosing risks and responsibilities, and setting up dispute resolution mechanisms.
- Establishing a system for continued operations, information security, and hot and cold wallet private keys, such as having backup plans, security measures, and key management policies.
- Implementing internal control and internal audit systems, such as having regular audits, risk assessments, and compliance reports.
- Declaring compliance with the anti-money laundering (AML) and counter-financing of terrorism (CFT) laws, such as verifying customers’ identities, reporting suspicious transactions, and cooperating with authorities.
- Registering with the FSC and obtaining a license to operate as a VASP in Taiwan, such as submitting an application form, paying a fee, and meeting the qualification requirements.
- Abiding by other relevant laws and regulations that apply to VASPs in Taiwan, such as tax laws, consumer protection laws, and data privacy laws.
Taiwan’s Crypto-Friendly Stance Amid China’s Crackdown
The announcement of the crypto regulation guidelines comes amid the complete ban on crypto trading and mining in mainland China, which has caused many crypto businesses and users to relocate or seek alternative markets.
Taiwan has been relatively crypto-friendly compared to its neighbor across the strait, as it recognizes crypto assets as legitimate commodities and allows them to be traded and held as investments.
However, Taiwan has also been cautious in developing a legal framework for crypto assets, as it faces challenges such as cross-border transactions, cyberattacks, frauds, scams, and tax evasion.
The FSC has previously stated that it does not intend to promote or restrict the development of crypto assets but rather to protect investors’ rights and interests.
The upcoming crypto regulation guidelines are expected to provide more clarity and certainty for the crypto industry in Taiwan.
