Taiwan unveils new guidelines for regulating digital asset firms

Taiwan’s FInancial Supervisory Commission (FSC), the territory’s top financial markets regulator, has announced a much-anticipated set of guidelines for virtual asset service providers (VASPs), emphasizing increased oversight and customer protections.

Under the new guidelines, which have been expected since September 7 when the FSC took over management of digital assets and announced it was drafting new guidelines, domestic digital asset platforms are required to ensure the separation and safe custody of company and customer assets and establish clear review standards for the listing and delisting of digital assets. Another critical change mandates that offshore exchanges seeking to operate in Taiwan must now register with the FSC.

“Foreign virtual asset platform operators that have not registered under the company laws and have not declared compliance with anti-money laundering regulations to the FSC may not solicit business within Taiwan or target Taiwanese nationals,” stated the guidelines.

This move is aimed at ensuring foreign VASPs adhere to local regulations, particularly concerning anti-money laundering (AML) measures.

The FSC also imposed further limitations on digital asset platforms, stating that they are “not allowed to engage in operations involving derivative financial product transactions with virtual assets as underlying assets or virtual asset businesses with securities-like characteristics.”

The intention is that it will improve financial market stability and prevent excessive speculation.

With this in mind, the FSC rounded off its press release by cautioning consumers against the risks of the digital asset space “in view of the recent illegal incidents on foreign virtual asset trading platforms, and the high volatility and speculation of virtual asset prices.”

Changing regulatory scene in Taiwan

The FSC’s first foray into digital asset oversight came in July 2021, when it introduced initial AML rules for VASPs.

Eventually, in March this year, Taiwan officially appointed the FSC as the territory’s digital asset watchdog. The regulator wasted no time and, in September, created its ten guiding principles for the digital asset industry, seeking to strike a balance between promoting innovation and protecting investors.

The FSC said that the Guiding Principles, which were formally unveiled this week, drew inspiration from regulations in the EU, Japan, and South Korea and incorporated feedback from local industry stakeholders.

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