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Taiwan advances crypto regulation with two drafts of “Virtual Asset Service Act”

Source Cryptopolitan

Taiwan is on the fast track to regulating crypto by introducing mandatory licenses for every firm trading digital assets.

The Financial Supervisory Commission (FSC) and a member of the Legislative Yuan have drafted separate versions of the “Virtual Asset Service Act,” which, if enacted, would change the country’s crypto framework.

The FSC released its draft of the “Virtual Asset Service Act” last week, while lawmaker Huang Shan-shan published her own version on Tuesday. The country lacks clear regulations that dictate how digital assets will operate, get licenses, or protect investors from fraud.

Taiwan has come up with two crypto bills to regulate the industry

Crypto firms in Taiwan have to follow anti-money laundering (AML) laws, but because there are no specific laws on handling digital assets, businesses struggle to differentiate legal from illegal trading activities, so they risk sudden legal changes or penalties.

Investors also feel unprotected without specific laws safeguarding them from fraud. If a crypto exchange platform shuts down or a project fails with its investment intact, it can’t take effective legal action against it. The new act will try to resolve these challenges by ensuring businesses practice the right trading activities that protect the interests of investors.

A business that does not follow the anti-money laundering requirements or skips registration with the government faces fines of up to NT$5 million ($150,400), or its officials could be imprisoned for up to two years. The new bill will make these laws stricter and ensure crypto firms provide high-quality services to all.

Strict licensing may force small crypto firms to exit the market

Crypto lawyer and secretary general of the Taiwan Fintech Association, Kevin Cheng, believes these new regulations will improve the quality of crypto firms’ services.

He also says that smaller council factories, with NT$300 million to 500 million in capital, might find it hard to stay competitive in light of these increased licensing fees. In response, lawyer Eddie Hsiung from the Taiwan Fintech Association proposed that Taiwan should not apply these laws uniformly regardless of the size of the company.

He suggested that instead, small fintech firms be granted the ability to comply with less strict requirements. The big ones, on the other hand, should uphold higher standards.

This still doesn’t move proponents of the bill, who argue that stricter rules are necessary to protect investors and prevent scams, as evidenced by previous high-profile crypto scams and exchange failures.

The FSC and lawmakers should review industry feedback before finalizing the bill to ensure they strike a balance between regulation and innovation. Doing so would allow small firms to grow, meet regulatory standards, and set clear guidelines on how businesses in the crypto space operate.

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