Taiwan's Financial Supervisory Commission (FSC) on May 28 announced amendments to the Regulations on Fraud Prevention for Financial Institutions and Virtual Asset Service Providers (VASPs), a subordinate regulation under the Fraud Crime Prevention Act enacted earlier this year. The changes formally integrate VASPs into the financial system's cross-industry anti-fraud framework. The revision covers 52 amended articles and 3 new ones, marking a significant regulatory update aimed at closing gaps between traditional financial institutions and crypto firms.
Cross-Industry Inquiry and Inter-Sector Reporting
First, a cross-industry inquiry mechanism allows banks and VASPs to proactively query each other about suspicious accounts or transactions, speeding up fraud detection. The rules specify the scope of inquiries, target entities, and required documentation when a query is received.
Second, a cross-institutional anti-fraud platform is established, with detailed requirements for approval, operational tasks, and permitted use of customer data, balancing fraud prevention with data privacy.
Third, an inter-sector reporting mechanism among deposit-taking institutions, electronic payment firms, and VASPs aims to block money flows between fiat and virtual assets, which previously bypassed traditional banking alerts once funds moved to exchanges.
Liquidation of Frozen Virtual Assets for Victim Restitution
Fourth, the amendment allows VASPs to liquidate remaining virtual assets in flagged accounts and return the proceeds in fiat currency to victims. This solves two problems: victims without crypto wallets can recover funds, and immediate liquidation prevents value erosion due to market volatility.
The FSC stated the draft will be published in the Executive Yuan Gazette, with a 30-day public comment period.