Taiwan has taken a significant step in regulating the cryptocurrency industry with the introduction of the Virtual Asset Management Bill on October 25th.
This legislative initiative, brought before the unicameral parliament, the Legislative Yuan, has been designed to enhance customer protection and introduce effective supervision within the virtual asset sector.
Spanning 30 pages, the bill sets forth a series of requirements for virtual asset service providers (VASPs), all of which appear reasonable and practical. Some of the key provisions include the segregation of customer funds from the company’s reserve funds, the establishment of an internal control and audit system, and participation in the local trade association. These measures are aimed at promoting transparency and accountability in the virtual asset industry.
Notably, the bill does not impose a specific requirement for stablecoin issuers to maintain a 1:1 reserve fund ratio, and it does not address algorithmic stablecoins. Additionally, regarding marketing activities, the bill delegates the authority to determine advertising rules to the “competent authority,” providing flexibility in the regulatory framework.
The bill also outlines penalties for VASPs that operate without the required license. Such violations could result in fines ranging from a minimum of 2 million Taiwanese dollars (approximately $60,000) to a maximum of 20 million TWD ($600,000). Existing companies in the Taiwan market will have a six-month grace period to obtain the necessary license once the bill becomes effective.
This development follows earlier moves by Taiwan’s Financial Supervisory Commission (FSC), which issued industry guidelines for VASPs in September 2023. Of note, the FSC has barred foreign VASPs from offering their services in Taiwan without obtaining the requisite approvals from the regulatory body.
The introduction of these rules and regulations aligns with the proactive stance taken by major cryptocurrency exchanges in Taiwan, which have established a self-regulatory association. On September 26, prominent local exchanges, including MaiCoin, BitstreetX, Hoya Bit, Bitgin, Rybit, Xrex, and Shangbito, united to create the Taiwan Virtual Asset Platform and Transaction Business Association. Their collective aim is to bolster the cryptocurrency industry and collaborate closely with regulators to ensure the sector’s growth and stability.
In conclusion, Taiwan’s Virtual Asset Management Bill represents a noteworthy move towards establishing a regulated and secure environment for the cryptocurrency industry within the country. By introducing practical guidelines and oversight measures, Taiwan seeks to provide a secure and thriving ecosystem for cryptocurrency enthusiasts, while also fostering cooperation between the industry and regulatory authorities.
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