Stop scaring users with your bad KYC flows

Taiwan has taken a significant step towards regulating its flourishing virtual asset market by introducing a new bill called the “Virtual Asset Management Regulations Draft,” which aims to create a comprehensive regulatory framework for the crypto industry.

The move comes as Taiwan grapples with the exponential growth of virtual assets in the country.

The bill’s primary goal is to establish rules for virtual asset service providers that ensure investors are protected, and any risks to financial stability are quickly identified and dealt with.

Current regime

Taiwan currently only requires virtual asset service providers to adhere to anti-money laundering regulations, a directive introduced by the Financial Supervisory Commission (FSC) in July 2021.

Critics argue that the FSC’s regulatory measures have lagged behind the industry’s growth and need to be updated.  Virtual asset operators have continued to multiply, and their offerings have become more diversified, but the FSC primarily only focuses on anti-money laundering compliance.

The overall cryptocurrency sector remains largely unregulated, and lawmakers believe the country needs a comprehensive regulatory framework for the burgeoning crypto industry.

As of August, the country was home to 200 domestic blockchain firms, according to the “Taiwan Blockchain Industry Map/Key Report.”

The bill

The proposed legislation will mandate cryptocurrency platforms in Taiwan to secure a permit to continue operating in the country, and non-compliance could result in regulatory intervention, including a potential suspension of operations.

Although the timeline for the bill’s second reading remains uncertain, experts suggest that it may extend beyond January 2024, coinciding with the conclusion of the present legislators’ tenure in Taiwan.

To establish market order, enhance regulation, and safeguard investor rights, Taiwan’s “Virtual Asset Management Regulations Draft” introduces provisions including:

  • Defining virtual asset scope and classifying operators.
  • Qualifications for leadership roles, permission procedures, and industry association requirements.
  • Mandating participation in designated industry associations.
  • Issuance rules for virtual assets and derivatives.
  • Customer asset separation and retention records.
  • Customer data protection and custody policy disclosures.
  • Public virtual asset trading rules and customer protection measures.
  • Transparent advertising and marketing practices.
  • Information security standards and incident reporting.
  • Internal controls, audit, compliance, and risk management requirements.
  • Financial reporting standards and capital enforcement.
  • Regulatory penalties for non-compliance.
  • Customer dispute resolution mechanisms and compensation.
  • Standardized information system maintenance.

This landmark legislation aims to stabilize Taiwan’s virtual asset market, boost investor confidence, and encourage responsible industry growth.

While challenges loom in implementation, the government’s proactive stance underscores its commitment to fostering a well-regulated virtual asset ecosystem.

Posted In: , Regulation

Leave a Reply

Your email address will not be published. Required fields are marked *