On September 26, Taiwan’s main financial regulator, the Financial Supervisory Commission (FSC), made a big move to strengthen cryptocurrency rules. They introduced clear guidelines to better protect cryptocurrency users and maintain a secure digital asset system in Taiwan. These guidelines underscore the FSC’s commitment to robust oversight of the cryptocurrency exchange sector and its determination to safeguard users within the state.
The groundwork for these new guidelines was laid earlier this year when the FSC reiterated its intention to closely regulate the cryptocurrency exchange sector. The main goal was to stop illegal activities, like money laundering. Ever since the FSC has been actively making sure that all cryptocurrency exchanges in Taiwan follow the rules against money laundering (AML).
Key Highlights of the New Guidelines
The newly unveiled guidelines contain several critical provisions aimed at promoting transparency, securing asset custody practices, and strengthening internal controls and management within cryptocurrency firms. Some key highlights include:
- Separation and Protection of Assets: Cryptocurrency exchanges operating in Taiwan must ensure the clear separation and protection of company treasury assets from customer assets. This measure is intended to safeguard customer funds in the event of financial difficulties or insolvency.
- Review Standards: The guidelines introduce a new review standard for the listing and delisting of digital assets. This will help maintain the quality and integrity of the assets available for trading on cryptocurrency platforms.
- Information Disclosure: Enhanced information disclosure requirements ensure that cryptocurrency exchanges provide users with the necessary information to make informed investment decisions.
- Foreign Firms: Foreign crypto companies that want to do business in Taiwan or serve Taiwanese customers need to sign up with the FSC and show they follow the rules against money laundering.
These rules have been in development for a while. In July 2021, the FSC first made it a rule that Virtual Asset Service Providers (VASPs) must follow anti-money laundering rules. This meant that obtaining approvals from the regulator became a mandatory prerequisite for any cryptocurrency exchange looking to operate in Taiwan or cater to its citizens.
The FSC made it abundantly clear that;
“overseas virtual asset platform operators are not allowed to provide business within the territory of the country unless they have been registered by the law.”
Promoting Self-Regulation
Recognizing the importance of self-regulation within the cryptocurrency industry, the FSC extended invitations to Virtual Asset Service Providers (VASPs) to participate in fostering self-regulatory standards. The FSC’s objective is to collaborate with VASP associations to develop self-regulatory norms that align with the principles outlined in the authority’s guidelines.
In response to the FSC’s call, several major cryptocurrency exchanges in Taiwan have come together to form a self-regulatory association. A working group, comprised of nine well-known Taiwan-based cryptocurrency exchanges, is actively crafting these self-regulatory norms. Their goal is to finalize and submit these norms to the FSC by mid-October.
This collaborative effort involves prominent local exchanges such as Maicoin, BitstreetX, Hoya Bit, Bitgin, Rybit, Xrex, Shangbito, and others.
Wayne Huang, co-founder and Group CEO of Taipei-based crypto exchange XREX, expressed his views on this development, stating that;
“The FSC’s new guidelines could give birth to a new industry, providing this new industry legitimacy, oversight, a solid path to grow, and an accelerated means to acquire public trust.”
Taiwan’s Financial Supervisory Commission (FSC) drew inspiration from regulatory frameworks in the European Union, Japan, and South Korea when crafting these new cryptocurrency regulations. These regulations are a direct response to the FSC’s assumption of the role of the primary regulator of cryptocurrencies in the country in 2023.
In a unified effort to comply with these regulations, several exchanges, including Kraken and Bybit, are considering participation. Kraken has affirmed its commitment to providing full services to users residing in Taiwan. Meanwhile, Bybit facilitates Visa and Mastercard payments in countries, including Taiwan.
Final Thought
Taiwan’s FSC has implemented robust cryptocurrency regulations to ensure user safety and market integrity. These guidelines focus on stringent oversight and collaborative self-regulation, setting a precedent for responsible industry growth.