Core of the New Law: VASP Licensing and Phased Compliance
According to the Taipei Times, Taiwan's Legislative Yuan has passed a landmark Virtual Asset Service Act, establishing a formal regulatory framework for cryptocurrency businesses in the region. Under the new law, all Virtual Asset Service Providers (VASPs) must obtain approval from the Financial Supervisory Commission (FSC) before commencing operations. The law requires VASPs to establish and maintain compliance standards covering internal controls, cybersecurity, and business continuity. For existing firms that have completed anti-money laundering registration before the law takes effect, regulators grant 12 months to submit license applications and an additional 21 months to secure regulatory approval. This means the entire transition period spans over two years, providing a buffer for the industry to adapt.
Stablecoin Regulation: Reserve Isolation and Interest Ban
The Act imposes strict requirements on stablecoin issuers. Issuers must maintain fully backed reserves held by financial institutions domiciled in Taiwan, and these reserves must be completely segregated from the issuer's own assets and common equity. In the event of the issuer's bankruptcy, the reserve assets are protected from claims by other creditors. The law explicitly prohibits stablecoin issuers from paying interest or any other returns to holders. Issuers are also subject to regular audits to ensure reserve transparency and adequacy.
Severe Penalties: Up to 7 Years in Prison and Fines Reaching NT$100 Million
The new law imposes tough penalties to deter violations. Operating a VASP or issuing stablecoins without authorization carries a maximum sentence of seven years in prison and a fine of up to NT$100 million (approximately US$3.14 million). Fraud involving virtual assets or manipulating prices, supply, or demand is punishable by three to ten years in prison and a fine of NT$10 million to NT$200 million (approximately US$310,000 to US$6.28 million). These penalty levels are among the highest in major Asian economies, signaling a zero-tolerance regulatory stance toward crypto market misconduct.
Outlook for Derivatives Market Opening
Notably, lawmakers also passed a non-binding resolution directing the FSC to submit a plan within one year that would allow virtual asset companies to offer cryptocurrency derivatives. Although the resolution is not legally binding, it provides policy guidance for a future opening of Taiwan's crypto derivatives market. Market analysts suggest that if the plan materializes, Taiwan could become another Asian jurisdiction open to crypto derivatives, further attracting institutional investors. The passage of the Virtual Asset Service Act marks Taiwan's regulatory shift from 'AML registration' to a full licensing regime. As detailed rules are further defined, VASPs and stablecoin issuers will face higher compliance costs, but also gain clear legal status. The next focus for the market will be whether the FSC submits the derivatives plan on schedule within the coming year.