Taiwan lawmakers propose new law to regulate cryptocurrencies

In this post:

  • Lawmakers in Taiwan are proposing the creation of a new law to regulate crypto in the country.
  • Challenges and opportunities in the new regulation.

Lawmakers in Taiwan are working towards proposing a draft special law for cryptocurrency regulation by the end of November. The move comes as concerns grow about regulatory arbitrage and the need for oversight of offshore cryptocurrency exchanges operating in the country. Yung-Chang Chiang, a member of Taiwan’s Legislative Yuan, highlighted the necessity of a dedicated crypto asset act to regulate cryptocurrency firms. He argued that cryptocurrencies differ significantly from traditional financial products and should be subject to distinct regulations.

Taiwan lawmakers see crypto differently from tradfi products

Chiang organized a public hearing in parliament to discuss the draft proposal with virtual asset service providers, legal experts, and academics. He emphasized that while Taiwan’s Financial Supervisory Commission (FSC) recently released guidelines for the crypto sector to establish self-supervisory rules through a potential industry association, such measures lack legal enforceability. Under the proposed special law, regulatory authorities would have the power to impose administrative penalties on operators who violate these self-regulation rules. Without such a special law, regulators would lack the ability to enforce penalties.

The key provision of the proposed special law would require all cryptocurrency platforms operating in Taiwan to apply for a permit. Those failing to do so could face orders to cease operations. Currently, Taiwan has required virtual asset service providers to comply with anti-money laundering (AML) laws since the FSC introduced AML rules in July 2021. However, the broader cryptocurrency industry remains largely unregulated. Chiang pointed out that there are still many crypto platforms operating in Taiwan that have not declared AML compliance with the FSC, and without a special law in place, regulators have limited recourse.

Challenges and opportunities in the new regulation

Chiang also acknowledged that it is unlikely for the special law to pass through three readings during the current legislative session, which is expected to conclude by the end of the year. He cited the upcoming election and the legislative session’s focus on reviewing the government’s budget as factors affecting the timeline. Regarding the FSC’s potential proposal of its version of the special crypto law, Chiang estimated that it might occur no earlier than mid-2024. He stated, “It’s hard to say exactly when the special law will be enacted, but it should likely occur sometime after the middle of 2024.”

At the public hearing, Damien Ho, representative of global partnerships at Binance, mentioned that many cryptocurrency platforms in Taiwan still face challenges in accessing suitable banking services. While the FSC’s banking bureau has encouraged banks not to treat crypto platforms as highly risky firms, the reality presents difficulties in banking relationships. Ho suggested that the Taiwan government should encourage private or public banks to become more crypto-friendly and handle crypto firms’ relevant business. This approach, he argued, would promote the development of crypto businesses in a regulated and effective manner.

Binance has taken steps to establish a presence in Taiwan for AML compliance. The exchange has a branch named Binance International Limited Taiwan Branch, with government approval in May 2023 and registered capital of NT$30 million ($933,000) in Taiwan. Winston Hsiao, co-founder, and Group CRO of XREX, emphasized the importance of compliance within the crypto industry but suggested a steady approach. Hsiao proposed that small-scale entities should be regulated by the self-supervisory rules formulated by the industry association after registration, while large-scale entities should obtain a permit under special law and potentially apply for other relevant financial licenses.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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