The Legislative Yuan yesterday passed a law establishing a regulatory framework for Taiwanese cryptocurrency businesses, including licensing requirements for virtual asset service providers (VASPs) and stablecoin issuers, as well as penalties for fraud and market manipulation.
Under the Virtual Asset Service Act (虛擬資產服務法), VASPs must obtain approval from the Financial Supervisory Commission before operating and comply with internal controls, cybersecurity and business continuity requirements.
VASPs that have completed anti-money laundering registration before the law takes effect would have 12 months to apply for licenses and 21 months to obtain regulatory approval.
Photo: Reuters
The act, which was proposed by the Executive Yuan on April 2, also establishes Taiwan’s first legal framework for stablecoins, which are virtual assets pegged to one or more fiat currencies.
Stablecoin issuers would be required to maintain full reserve backing, with segregated reserve assets held in trust by domestic financial institutions. The reserve assets are protected from claims by other creditors if the issuer enters bankruptcy proceedings.
Issuers must also undergo regular audits and are prohibited from paying interest or other returns to holders.
The act also states that unauthorized operations of a VASP or issuance of stablecoins is punishable by up to seven years in prison and a fine of up to NT$100 million (US$3.14 million).
Fraud involving virtual assets — or manipulation of prices, supply or demand — is punishable by three to 10 years in prison and fines from NT$10 million to NT$200 million.
Lawmakers also adopted a nonbinding resolution requesting that the Financial Supervisory Commission submit a plan within one year to allow virtual asset firms to offer cryptocurrency derivatives.
