Taiwan Takes Decisive Steps Toward Cryptocurrency Regulation

Taiwan has introduced a cryptocurrency law for its first reading in the Legislative Yuan, marking a dramatic change in the country’s attitude to cryptocurrency legislation. Taiwan’s initial efforts towards complete regulation of cryptocurrencies are embodied in the proposed law.

The Virtual Asset Management Ordinance Draft is a draft bill that aims to solve a number of important issues related to the bitcoin space. It aims to provide strong client protection, define virtual assets, provide operational guidelines for cryptocurrency operators, and require these operators to join industry groups in order to get governmental approvals.

Prior to today, Taiwan has taken a very laissez-faire approach to cryptocurrency regulation, limiting its regulation to the rules already in place on know-your-customer and anti-money laundering. But once FTX, a well-known bitcoin exchange in Taiwan, collapsed, the nation’s regulatory strategy gained traction. The appeal of FTX’s US dollar interest rates over those offered by neighborhood banks contributed to its success.

Embracing Unique Characteristics and Diverse Participation

Taiwan’s draft bill keeps a neutral position on cryptocurrency derivatives and stablecoins, in contrast to neighboring Hong Kong’s strict rules. However, the bill recognizes that derivatives associated with virtual assets have special features, mentioning everlasting contracts in particular. This acknowledgement opens the possibility for future versions to include restrictions tailored specifically to cryptocurrency derivatives.

Another way that Taiwan’s cryptocurrency law stands itself apart is that it does not limit virtual asset trading to only experienced traders. More people are participating in the bitcoin market as a result of this inclusion.

Transparency and accountability in the bitcoin industry are highly valued in the proposed bill. It requires cryptocurrency exchanges to hire accountants and require them to provide reports on a regular basis about their business and the funds under their management. These exchanges also have to allow regulatory agencies, such the Financial Supervisory Commission (FSC), regular access to examine their audit and internal control systems.

Although Proof of Reserves is not specifically included in the present form of the law, it does state that the sector and the regulator would work together to develop criteria for asset ratios. These guidelines must be followed by authorized cryptocurrency exchanges in order to promote more accountability and transparency within the bitcoin ecosystem.

Taiwan’s bitcoin sector stakeholders have indicated that they are open to official regulatory monitoring. The CEO and co-founder of Taipei-based fintech company XREX, Wayne Huang, has highlighted the dynamic nature of Taiwan’s approach to cryptocurrency regulation by expressing the necessity for the virtual asset service provider sector to collaborate with the FSC in order to define regulatory procedures.