Newsletter
Taiwan's Financial Supervisory Commission Announced Draft Virtual Assets Service Act
On March 25, 2025, Taiwan’s Financial Supervisory Commission ("FSC") introduced the draft “Virtual Asset Service Act” (the “Draft Act”) to strengthen the operation and development of virtual asset businesses in Taiwan. The key points of the Draft Act are summarized below:
1. Licensing and General Regulatory Framework for VASPs (Articles 1 to 27)
The Draft Act mandates that Virtual Asset Service Providers ("VASPs") must obtain approval from the FSC for their operations, establishing branches (including branches set up in Taiwan by foreign VASPs), opening physical business locations, or providing automated services. VASPs are prohibited from concurrently engaging in any businesses not approved by the FSC. However, financial institutions may, with the FSC approval, concurrently provide virtual asset services.
The Draft Act further requires that VASPs must include virtual asset-related words in their official names, and their responsible persons and personnel must meet the qualification requirements prescribed by the FSC. As to financial aspects, VASPs are required to meet the minimum capital requirement, provide an operation bond, and are subject to limits on total liabilities. In terms of internal control and audit, VASPs must implement information security management system, operational data management and confidentiality policies, and business continuity plan. The Draft Act also regulates the outsourcing of operations by VASPs.
Notably, Article 6 of the Draft Act broadens the definition of VASPs to include "virtual asset lenders" and introduces a flexible clause allowing the FSC to approve other types of virtual asset service providers that may be designated by the FSC in the future, accommodating future industry developments.
2. Specific Regulatory Requirements for each type of VASP (Articles 24 to 28)
The Draft Act sets specific requirements for different types of VASPs.
For example, exchange service providers and underwriters must publish offering documents for the virtual assets they service; trading platforms must establish standards and procedures for listing and delisting virtual assets; and custodians may only entrust client assets to custodians approved by the FSC.
3. VASP Industry Association (Articles 29 to 33)
To encourage industry self-regulation, the Draft Act mandates that all VASPs join the industry association for VASPs.
4. Issuance and Regulation of Stablecoins (Articles 34 to 35)
Given that stablecoins involve receiving funds from the public, the Draft Act requires stablecoin issuers to obtain approval from FSC before issuance. Issuers must also maintain sufficient reserve assets in domestic financial institutions, including fully funded reserve accounts to back the stablecoin issuance.
5. Trading Market Supervision and Penalties (Articles 36 to 48)
The Draft Act explicitly prohibits virtual asset fraud and manipulation. Violators may face detention, imprisonment, criminal fines, or revocation of their business license.
6. Transitional Provisions (Article 49)
For VASPs already registered under anti-money laundering regulations, the Draft Act provides a transitional period to apply for the required licenses.
The Draft Act is open for public feedback from March 26, 2025 to May 24, 2025, and is expected to be submitted to the Executive Yuan (cabinet) for review in June 2025.
Lee and Li has a long-established Banking and Capital Markets Practice Group. If you have any questions related to virtual asset businesses or associated legal matters, please feel free to contact our experts in this regard.