Taiwan Targets Unlicensed Crypto Firms With Seven Year Jail Terms

Taiwan has moved from basic AML registration to a full crypto licensing system. The Legislature approved the Virtual Asset Service Act on June 30, giving the Financial Supervisory Commission sole control over virtual asset supervision.

Good To Know

• Taiwan VASPs will need FSC licenses instead of only AML registration.
• Stablecoin issuance will be limited to domestic banks.
• Unlicensed VASP activity or stablecoin issuance can bring up to seven years in prison and fines of up to $3.1 million.

FSC Gets Direct Control Over Crypto Firms

The 56 article law creates Taiwan first dedicated crypto statute and puts exchanges, trading platforms, custodians and wallet operators under FSC approval.

The new system ends the older model, where firms registered mainly for anti money laundering purposes. Under the Virtual Asset Service Act, firms must meet rules covering internal controls, cybersecurity, business continuity and service specific licensing.

One license will no longer cover everything. Providers must apply across separate categories, including exchange, trading platform, transfer, custody, underwriting, lending and other services. That makes Taiwan crypto regulation closer to a full financial services model than a light registration regime.

Eight firms that already completed AML registration will receive a transition period. They will have 12 months to apply for licenses and 21 months to obtain certification after the law takes effect. A three month extension may be available.

Stablecoins Get A Bank Only Framework

Taiwan also added its first stablecoin rulebook. Domestic stablecoin issuance will be limited to banks, and tokens must be pegged only to fiat currencies.

Issuers must keep full one to one reserves, separate those reserves from company funds and place them in trust with domestic financial institutions. That structure aims to reduce reserve risk and make redemption backing easier for regulators to check.

Foreign stablecoins such as USDT and USDC will not get automatic access. They will be treated as regulated commodities and need FSC approval before licensed exchanges can list them.

The penalty section gives the law real force. Firms that operate virtual asset services or issue stablecoins without authorization face prison terms of up to seven years and fines of up to NT$100 million, or about $3.1 million.

Derivatives Could Come Later

The law is not finished at passage. The FSC still needs to draft around nine pieces of secondary legislation by early 2027, covering operational details and compliance procedures.

The Virtual Asset Service Provider Association said it will help firms prepare for rules on establishment, personnel management, internal controls, abnormal transaction monitoring, outsourcing and financial statements. It will also run committees for listing review, discipline and fraud prevention compliance.

Lawmakers also passed a nonbinding resolution asking the FSC to submit a plan within one year for licensed firms to offer crypto derivatives. That does not legalize derivatives yet, but it gives the market a formal path to discuss futures, options or other structured crypto products under licensed supervision.