Taiwan has passed a comprehensive regulatory package for the digital asset sector. The Legislative Yuan passed the Virtual Asset Service Law in the third reading and submitted it to President Lai Ching-te for approval. The official signature is expected to be made within the next ten days.
License and activity conditions have been expanded
Once the law comes into force, all virtual asset service providers wishing to operate in the country will need to obtain an open license from the Financial Supervisory Commission. This obligation also covers cryptocurrency exchanges and various trading platforms. The Financial Supervisory Commission stands out as the main institution that oversees Taiwan’s financial sector, including banking and capital markets.
The new framework is not limited to licensing only. The regulation also requires strengthening cybersecurity measures, keeping customer assets separate from company accounts, and tightening internal governance and risk management standards. Thus, Taiwan is transforming the oversight that previously operated mainly through its anti-money laundering registry into broader regulatory oversight.
The law requires virtual asset service providers to obtain a license from the Financial Supervisory Commission and comply with stricter operating, governance and custody rules to operate legally in the country.
Transition process and stablecoin rules
A transition period has been granted to registered platforms within the scope of the fight against money laundering. These companies will be able to use 12 months to submit their license applications and up to 21 months in total to obtain full approval and other necessary permits. In the previous system, the main obligation of crypto companies was limited to anti-money laundering.
In the stablecoin field, a stricter approach was adopted. Organizations that will operate in this field will need to obtain approval from both the central bank and the Financial Supervision Commission. In addition, these assets will be required to be supported by 100 percent reserves at all times.
Mini glossary: A stablecoin is a type of crypto asset whose value seeks to be pegged to a fiat currency or other external reference, usually the US dollar. The Bank for International Settlements had warned that stablecoins pegged to the dollar could create exchange rate risks.
Heavy penalties were foreseen for violations
The law imposes harsh sanctions for activities that violate the rules. Those who offer crypto platform or stablecoin services without permission could face up to seven years in prison and a fine of up to 100 million Taiwan dollars. This amount corresponds to approximately 3.14 million dollars.
Penalties become even more severe for violations such as market fraud or price manipulation. Within the scope of these charges, a prison sentence of three to ten years and a fine of between 10 million and 200 million Taiwan dollars can be imposed.
While central bank and Financial Supervision Commission approval was required for stablecoin services, the requirement to hold 100 percent reserves was also made mandatory.
The official effective date of the law will be determined by the Executive Yuan following the approval of the President. Thus, the cryptocurrency industry in Taiwan is expected to move from basic compliance obligations to full-fledged oversight.
