Taiwan Tightens the Reins on Crypto with Stricter Regulations and a January 2025 AML Deadline

Taiwan's Stricter Regulatory Framework for Virtual Asset Service Providers

Taiwan's Financial Supervisory Commission (FSC) has taken a decisive step to regulate the expanding cryptocurrency market by mandating that all virtual asset service providers (VASPs) must register with the regulator by the end of September 2025.

This new requirement is part of a broader initiative to bolster oversight in an industry often characterized by its speculative nature and associated risks.

The consequences of non-compliance are severe: VASPs could face imprisonment for up to two years and fines reaching NT$5 million (approximately $155,000), according to Radio Taiwan International.

What Are the New Anti-Money Laundering Regulations?

The FSC's new anti-money laundering (AML) regulations are currently in draft form and set to take effect on 1 January 2025.

These regulations aim to enhance the scrutiny of crypto businesses and reduce the risks related to illicit activities.

In addition to mandatory registration, VASPs will need to satisfy specific capital requirements and implement comprehensive customer protection measures.

These measures include ensuring that management teams possess the requisite professional experience and are devoid of any criminal records, thus raising the bar for operational integrity within the sector.

This regulatory evolution represents a significant tightening of Taiwan's previous approach to cryptocurrencies.

While the country introduced initial AML rules in July 2021, the forthcoming regulations will require even fully compliant firms to re-register with the FSC to avert penalties.

This insistence on re-registration signifies an uncompromising stance toward ensuring the integrity of virtual asset operations in Taiwan.

How Will Taiwan's Special Law Influence Crypto Regulation?

Looking beyond the immediate registration deadline, the FSC plans to introduce a comprehensive "special law" to govern cryptocurrencies.

This law is being developed with reference to regulatory frameworks in leading jurisdictions such as the European Union, Japan, Hong Kong, the United Kingdom, and South Korea.

Expected to be unveiled in June 2025 and subsequently approved by the Executive Yuan, this legislation will likely provide a more robust regulatory environment, addressing the complexities and unique challenges posed by the cryptocurrency market.

Taiwan's Approach Reflects Global Trends

Taiwan's initiative mirrors a broader global trend toward increased regulatory scrutiny within the cryptocurrency sector.

The FSC's measures align with international standards for combating money laundering and terrorist financing in the digital asset realm.

By implementing stringent registration requirements, capital constraints, and enhanced customer protection protocols, the FSC aims to foster transparency and mitigate risks, ultimately safeguarding investors.

What Recent Developments Indicate About Taiwan's Crypto Market?

While these regulations mark a step towards stricter oversight, Taiwan has simultaneously made strides to liberalize certain aspects of its cryptocurrency landscape.

In recent months, institutional investors and high-net-worth individuals have been granted permission to trade foreign crypto exchange-traded funds (ETFs), albeit under specific conditions and restrictions.

This dual approach illustrates Taiwan's effort to balance regulatory oversight with the need to promote innovation within the cryptocurrency space.

Despite these advancements, the FSC's leadership remains cautious.

In March 2024, FSC Chairman Huang Tianmu voiced concerns about the speculative nature of virtual assets, stating, "The lack of intrinsic value presents considerable risks."

His comments highlight the necessity for prudent regulation, emphasizing the importance of protecting the public from potential losses in an increasingly complex financial environment.