Taiwanese legislators have presented the Virtual Asset Management Bill to the Legislative Yuan, marking the country's initial move toward regulating the digital asset sector. The bill, focused on customer protection and industry supervision, outlines obligations for virtual asset service providers (VASPs), including the separation of customer funds, internal controls, and participation in local trade associations.

Taiwan aims to establish a comprehensive regulatory framework for its growing virtual asset market with the introduction of the Virtual Asset Management Regulations Draft. This initiative responds to the exponential growth of virtual assets in the country and addresses the lag in regulatory measures, which currently focus on anti-money laundering compliance.

Taiwan's parliament, the Legislative Yuan, has passed the first reading of the proposed crypto law, signalling a significant step towards regulating the cryptocurrency industry in the country. Co-authored by Yung-Chang Chiang and 16 other lawmakers, the law aims to bring the crypto sector under regulatory oversight.

What Does The Virtual Asset Management Bill Include?

Under the proposed law, all cryptocurrency platforms in Taiwan must secure permits, emphasising the government's commitment to regulatory oversight. The law addresses the lack of legal enforceability in previous guidelines, empowering regulatory authorities to impose penalties for violations. The move seeks to prevent regulatory arbitrage, enhance investor protections, and establish a legal framework for the crypto sector. The timeline for the second reading remains uncertain, potentially extending beyond January 2024.

The 30-page bill suggests fines ranging from 2 to 20 million Taiwanese dollars for unlicensed VASPs. Stablecoin issuers are not mandated to hold a 1:1 reserve ratio, and algorithmic stablecoins are not addressed. Advertising rules remain subject to determination by a "competent authority."

In September 2023, the Financial Supervisory Commission (FSC) released industry guidelines, prohibiting foreign VASPs from operating without regulatory approval. Local exchanges formed a self-regulatory association, the Taiwan Virtual Asset Platform and Transaction Business Association, to collaborate with regulators.