Last week, the Financial Supervisory Commission (FSC) announced guidelines for virtual asset service providers (VASPs). This was six months after the Executive Yuan tasked the regulator with overseeing virtual currency platforms and transactions to comply with anti-money laundering rules and prevent the potential financing of terrorism.
Virtual assets are digital representations of value which can be traded and used for payments or investment purposes. This includes cryptocurrencies such as bitcoin and other crypto assets, but excludes digital representations of fiat currencies or general securities and derivatives. A VASP is an entity or individual that provides services associated with virtual assets.
The commission’s news release stated that the guidelines are intended to enhance customer protection when using domestic VASPs. These include: disclosure of information by VASPs, review procedures for product launches and withdrawals, separation of assets between customers and platform operators, transparency and fairness in transactions, prevention of money laundering, promotion of internal controls, external auditing, information security, and the management of “hot” and “cold” crypto wallets.
The commission also plans to ask platform operators to form a self-regulating mechanism so that members of the sector can monitor their legal, ethical, and security standards. This should improve customer protection while allowing the sector room for further development and innovation.
Although the commission does not intend to seek special legislation or become a comprehensive regulator, they reserve the right to inspect domestic virtual asset platforms when things go wrong. In the long term, the commission should consider legislation or enhance their regulatory power to support healthy growth in the domestic virtual asset sector.
Taiwan’s Regulations Governing Anti-Money Laundering and Countering the Financing of Terrorism for Enterprises Handling Virtual Currency Platforms or Transactions was implemented in June 2021, but might not apply to all potential contraventions. To ensure the sector’s long-term development, the commission must review and adjust its regulations on a rolling basis and collect feedback from domestic VASPs. Additionally, they must cooperate with other government agencies and monitor the actions of international organizations and regulators.
