The rise of the digital-savvy generation in Taiwan has sparked a dynamic market for crypto assets. With the exciting adoption of crypto assets, the Taiwanese regulators have tabled a new crypto bill at the Legislative Yuan.
During the first hearing, the policymakers underlined that the new provision promotes consumer protection in the crypto sector.
Taiwan Presents New Crypto Bill
Additionally, the Virtual Asset Management Bill aims to fill the existing regulatory gaps in the crypto industry. The 30-page bill outlines the procedures regulators will adopt to supervise the crypto industry.
The drafted bill outlines the standard operating procedures for virtual asset service providers (VASP). According to the new legislation, the Taiwanese VASPs must separate the customers’ funds from the reserve funds to operate compliantly.
However, the stablecoin issuers will receive a different treatment from the VASP. The report indicated that the stablecoin issuer will be exempted from the 1:1 reserve fund holding.
However, the regulators plan to consult the public on the suitable assets ratios for digital assets. After the imminent public consultation, the VASP must allocate their assets according to the proposed ratios.
The VASP will also be required to deploy a well-functioning internal control and audit system to ensure compliance with the law. The new legislation mandates the VASP to formulate financial reports that provide an overview of the company’s operation and assets under management.
The new provision mandates the Taiwan Financial Supervisory Commission (FSC) to regularly assess the company’s internal control and financial statement to restore financial integrity in Taiwan.
Crypto Firms Supports Taiwan Government in Providing Regulatory Clarity for Digital Assets
Furthermore, the VASP will be required to register with the Taiwanese Trade Association for public relations activities. The report indicated that the VASP will work towards attaining a common goal by joining an industry association.
Recently, the change in the crypto regulatory landscape inspired the Taiwanese VASPS and exchanges to create associations to strengthen the relationship between the regulators and the businesses. Last month, the Taiwanese VASPs launched the Taiwan Virtual Asset Platform and Transaction Business Association to support the regulators in providing regulatory clarity for digital assets.
The new legislation mandates the Taiwanese authority to govern the VASP marketing activities. Also, the VASP must meet the licensing requirement to operate as a regulated entity.
Failure to comply with the licensing requirement subjects the VASP to legal action, which includes paying a $60,000 penalty to the local authority. Depending on the complexity of the matter, the non-compliant firms might be required to settle $ 600,000 in fines.
Based on the Taiwan rule-making process, the new bill will undergo several legislative procedures before it’s enforced into law by President Tsai Ing-Wen. Guided by Article 57 of the Taiwan constitution, the bill will be approved by the legislative and the executive yuan.
The report indicates that if Taiwanese lawmakers support the draft VASP bill, token issuers and local exchanges must apply for a license within six months.
Regulators in Taiwan to Punish Non-Compliant Crypto Firms
Commenting on the new bill, Yung-Chang Chiang, an advocate for financial reforms and a member of the Legislative Yuan, confirmed that after the first reading, the account will proceed to the second reading scheduled in January 2024.
At this stage, the lawmakers will deliberate more on the regulatory framework for crypto assets. Chiang noted that the new legislation grants the regulatory authority the legal power to impose penalties on non-compliant VASPs.
Under the special law, the regulators can effectively monitor all crypto-related activities.Initailly, Chiang proposed the special law requirements in collaboration with sixteen other lawmakers to ensure the VASPs and crypto firms are fully licensed.
The new legislation demonstrates that Taiwan seeks to create a crypto-friendly environment for investors and VASPs.
Since 2022, Taiwanese regulators have sought to regulate the crypto industry entirely. The aftermath of the FTX implosion obliged the Taiwanese regulators to tighten the know-your-customers (KYC) and anti-money laundering (AML) regulations to shield the customers from financial losses.