Taiwan's New Crypto Regulations Set for 2025
Taiwan is gearing up for a significant regulatory overhaul in its cryptocurrency sector, with the introduction of new criteria governing the listing of crypto assets and record-keeping practices.
The Taiwan Financial Supervisory Commission (FSC) is set to roll out its “registration regulation” in January 2025, aiming to establish a robust framework for virtual asset service providers (VASPs).
This initiative follows the FSC's appointment as the principal regulatory body overseeing the crypto market in March 2023, and it promises to reshape the landscape for crypto transactions in Taiwan.
Compliance Registration and Legal Ramifications
At the recent FinTechOn conference in Taipei, Hsi-Ho Huang, director of the securities firms division of the FSC, emphasised the importance of compliance.
FinTechOn conference is an event focused on advancing financial technology, organised by the Taiwan National Development Council and hosted by the Taiwan FinTech Association.
He stated that “virtual asset service providers” will need to complete compliance registration with the new rules.
Non-compliance will carry serious consequences, including potential criminal penalties, which could lead to imprisonment for up to two years.
This firm stance reflects Taiwan's commitment to enhancing the integrity of its financial system while ensuring that crypto-related activities are transparently regulated.
Enhanced Scrutiny of Crypto Operations
The upcoming regulations will replace the existing anti-money laundering laws that VASPs have adhered to since July 2021.
With the FSC's new rules, Huang highlighted the regulator's intent to intensify scrutiny in crucial areas such as custody of fiat currency, information security, and customer complaint handling.
Huang emphasised that the regulator aims to create clearer guidelines for the listing and delisting of crypto assets.
This strategy seeks to reduce risks linked to unfair trading practices and irregular trading patterns, ultimately promoting a safer trading environment for consumers.
Custody and Asset Protection
Another pivotal aspect of the new regulations involves the custodians of crypto assets.
The FSC will mandate that these custodians either place client assets in trust or segregate them from the proprietary assets of the trading platforms.
This requirement aims to enhance asset protection and build greater trust among investors.
Additionally, custodians will be obligated to engage a certified public accountant (CPA) to produce annual reports regarding the status of client assets, ensuring accountability and transparency.
The Road Ahead for Crypto Legislation
Looking beyond the immediate regulatory framework, the FSC is also working on drafting a special law proposal tailored specifically for crypto assets.
Jin-Lung Peng, chairman of the FSC, announced at the conference that progress is being made and the proposal is set to be submitted to the Executive Yuan, Taiwan’s highest administrative organ, by June 2025.
Jin-Lung Peng, Chairman of FSC, speaking at the conference.
In parallel, the local crypto sector has formed an industry association to establish self-supervisory rules that align with government guidelines, demonstrating a proactive approach to regulation and collaboration.
The Evolution of Crypto Regulation in Taiwan
Taiwan’s approach to crypto regulation has seen significant evolution in recent years.
Since 2021, the FSC has required exchanges and trading platforms to comply with anti-money laundering (AML) and know-your-customer (KYC) regulations.
This year, oversight was further strengthened, demanding more detailed disclosures regarding trading operations.
The FSC is contemplating classifying crypto exchanges as financial institutions, a change that would enforce stricter security and reporting standards.
Moreover, earlier in 2024, the Ministry of Justice proposed stringent new AML regulations aimed at combating fraud within the virtual asset sector.
Miyuki
