Taiwan, a hub for cryptocurrency activity, has introduced the Virtual Asset Management Bill in its legislative parliament, aiming to enhance customer protection and industry supervision.
A Step Towards Better Regulation
The 30-page bill, introduced by Taiwanese legislators, outlines several key measures aimed at regulating the virtual asset service providers (VASPs) while striking a balance between industry growth and customer security.
Protecting Customer Funds
The bill mandates that VASPs separate customer funds from the company’s reserve funds, ensuring that customers’ assets remain secure even in times of financial instability. This separation is crucial in safeguarding customers’ investments.
Internal Controls and Audits
To ensure transparency and accountability, VASPs will be required to establish an internal control and audit system. This measure aims to prevent fraudulent activities and maintain trust within the cryptocurrency industry.
Local Engagement Through Trade Associations
The bill encourages VASPs to join local trade associations, promoting community and cooperation within the industry. This cooperation can help address common challenges and create a framework for self-regulation.
Stablecoins and Marketing Guidelines
While the bill does not mandate stablecoin issuers to hold a 1:1 ratio of reserve funds, it provides flexibility regarding algorithmic stablecoins. Marketing activities are subject to guidelines determined by the “competent authority,” ensuring responsible promotion within the sector.
Strict Enforcement and Licensing
VASPs operating without a license may face fines ranging from 2 million to 20 million Taiwanese dollars, ensuring stringent enforcement of the regulations. Existing companies in Taiwan’s crypto market have a grace period of six months to obtain the required licenses.
Support from the Financial Supervisory Commission
In September 2023, Taiwan’s Financial Supervisory Commission (FSC) released comprehensive industry guidelines for VASPs. The FSC also restricts foreign VASPs from operating in Taiwan without the necessary approvals, reinforcing a controlled environment.
The Rise of Self-Regulation
Taiwan’s cryptocurrency exchanges have taken the initiative to self-regulate their activities. Leading exchanges, including MaiCoin, BitstreetX, Hoya Bit, Bitgin, Rybit, Xrex, and Shangbito, have formed the Taiwan Virtual Asset Platform and Transaction Business Association. This self-regulatory association aims to foster collaboration between the crypto industry and regulators, promoting sustainable growth and compliance.
Taiwan’s introduction of the Virtual Asset Management Bill reflects a balanced approach to regulating the cryptocurrency industry, prioritizing customer protection while fostering industry growth. With clear guidelines and penalties for non-compliance, Taiwan aims to establish a secure and thriving environment for virtual asset services.