Taiwan has passed a new law for the digital asset sector that makes licensing mandatory for crypto businesses and raises penalties for violations. Under the measure, virtual asset service providers will need approval from the Financial Supervisory Commission before operating, while stablecoin issuance and management will face tighter scrutiny.
Licensing becomes the legal baseline for crypto firms
The Legislative Yuan approved the Virtual Asset Service Act in its third reading on Tuesday. The bill now goes to President Lai Ching-te, who is expected to promulgate it within 10 days, while the cabinet will decide when the law formally takes effect. Once active, every virtual asset service provider in Taiwan must secure regulatory approval before doing business.
The law does more than create a licensing system. It also strengthens standards for cybersecurity, customer asset protection, and internal governance. Existing crypto businesses that already completed anti-money laundering registration will receive a transition period rather than face an immediate halt. After the law takes effect, they will have 12 months to apply for a license and another 21 months to obtain full regulatory approval and any other required permits.
Stablecoin issuers face dual approval and full reserve rules
Stablecoins are singled out for stricter oversight. Any company seeking to issue or manage a stablecoin must obtain approval from both the central bank and the Financial Supervisory Commission. The law also requires every stablecoin to remain fully backed by reserves.
That shifts stablecoin activity into a more formal approval framework. For issuers and operators, reserve management and internal controls are no longer side issues; they become part of the core regulatory review.
Unlicensed activity, fraud, and manipulation draw heavier penalties
The enforcement section is one of the strongest parts of the bill. Anyone operating an unlicensed virtual asset business or stablecoin service could face up to 7 years in prison and fines of as much as NT$100 million. Cases involving fraud or crypto market manipulation may bring prison terms ranging from 3 to 10 years, along with higher financial penalties.
The message from regulators is plain. Operating without approval is no longer just a compliance failure; it carries explicit criminal risk under the new framework.
Clearer market rules may open the door to banks
The legislation is expected to replace regulatory uncertainty with clearer operating standards for the industry. Kevin Cheng, a Taiwanese lawyer and founder of Harmony Governance Advisors, said businesses that once operated in legal gray areas will no longer be able to rely on ambiguity.
He also said traditional financial institutions may eventually enter the market, increasing pressure on existing crypto firms. Titan Cheng, chairman of the Taiwan VASP Association and founder of BitoGroup, said the association will work with regulators on detailed implementation rules covering licensing, operations, personnel management, and internal controls, while helping firms move through the transition period with less disruption.