Chiara Bianchi
Taiwan is taking a significant step toward regulating the cryptocurrency industry, as both the Financial Supervisory Commission (FSC) and Legislative Yuan member Huang Shan-shan have introduced competing drafts for a special crypto act.
The FSC officially released its proposed “Virtual Asset Service Act” last week, while Huang unveiled her version on Tuesday. Both proposals aim to require all crypto platforms operating in Taiwan to obtain a license. Additionally, foreign crypto firms must establish local entities and secure relevant permits to continue operating in the region, according to documents reviewed by PRIME.
Regulatory Timeline: Whatโs Next?
During a public hearing in parliament on Tuesday, lawmaker Huang expressed her intention to finalize the bill and push it through its first reading soon, targeting implementation by the end of the year. Meanwhile, the FSC is accepting public feedback on its draft until May 24, with plans to submit the proposal to the Executive Yuan for review by the end of June.
This isnโt Taiwanโs first attempt at a dedicated crypto law. A similar bill was introduced in 2023, but failed to progress before lawmakers’ terms ended.
Increased Compliance Costs Could Challenge Crypto Firms
The proposed regulations would substantially raise compliance costs for crypto businesses, industry leaders warned during the hearing.
Currently, Taiwan mandates crypto service providers to complete anti-money laundering (AML) registration, with non-compliance punishable by up to two years in prison or fines reaching NT$5 million ($150,400).
Eddie Hsiung, a partner at Lee and Li law firm, suggested a tiered regulatory approach based on company size, arguing that the existing AML requirements have already increased financial burdens on the industry.
Kevin Cheng, secretary general of the Taiwan Fintech Association, noted that the proposed law would demand higher standards for both management teams and operational structures, bringing crypto firms in line with traditional financial institutions.
“Under the current framework, firms with NT$30 million to NT$50 million in capital can still operate. However, if the new law is passed, even those with NT$300 million to NT$500 million may struggle to stay in business,” Cheng explained.
This could force smaller crypto companies out of the market, reducing industry competition.
Liquidity Challenges and the Role of Cross-Border Trading
Another pressing issue is the lack of liquidity among local crypto exchanges. Many firms rely on cross-border trading to ensure market stability, a factor that needs to be addressed in any regulatory framework.
Damien Ho, a representative of Binanceโs APAC team, emphasized that regulations should foster liquidity and create a more stable trading environment while maintaining proper risk management frameworks.
Conclusion: Striking a Balance Between Regulation and Growth
Taiwanโs push for crypto regulation reflects a growing global trend of tighter oversight in the digital asset industry. However, the final version of the law will need to balance investor protection with industry growth, ensuring that smaller firms are not pushed out while liquidity remains strong for a healthy market.
