Regulatory Framework Enacted: Mandatory VASP Licensing and Compliance
Taiwan's Legislative Yuan has formally passed the Virtual Asset Service Act, establishing a clear regulatory pathway for Virtual Asset Service Providers (VASPs) and stablecoin issuers. Under the new law, any entity seeking to operate as a VASP in Taiwan must obtain prior approval from the Financial Supervisory Commission (FSC). Entities that have already completed anti-money laundering registration prior to the law's effective date will have a 12-month transitional period to submit a license application, followed by an additional 9 months (21 months total) to secure final regulatory approval.
VASPs are required to implement robust internal controls, cybersecurity measures, and business continuity plans to safeguard customer assets and ensure system stability. The FSC will conduct ongoing supervision and inspections to enforce compliance.
Stablecoin Issuance: Full Reserves, Segregated Custody, No Interest
For stablecoins, the law mandates that issuers maintain reserve assets equal to 100% of the outstanding stablecoin value. These reserves must be held by locally licensed financial institutions in accounts segregated from the issuer's own assets. In the event of the issuer's bankruptcy, the reserve assets are protected from claims by other creditors, ensuring that stablecoin holders are prioritized.
Stablecoin issuers are also subject to regular independent audits. The law explicitly prohibits paying any form of interest or returns to stablecoin holders, positioning stablecoins strictly as payment instruments rather than investment products and avoiding direct competition with bank deposits.
Severe Penalties: Fraud and Market Manipulation Face Up to 10 Years
The new legislation imposes criminal penalties for operating a VASP or issuing stablecoins without authorization: up to seven years' imprisonment and a maximum fine of NT$100 million (approximately US$3.14 million). For fraud involving virtual assets, or for manipulating prices, supply, or demand, the penalties escalate to three to ten years' imprisonment and fines ranging from NT$10 million to NT$200 million (US$314,000 to US$6.28 million).
Additionally, legislators passed a non-binding resolution directing the FSC to submit a plan within one year exploring the possibility of allowing VASPs to offer cryptocurrency derivatives. This signals a potential future expansion of Taiwan's crypto market into derivatives trading, though specific rules await the FSC's proposal.