Taiwan to Introduce Special Legislation for Bitcoin and Crypto by the End of November!

• Taiwanese Parliament member Yung-Chang Chiang stated in an interview today that there is a need for special cryptocurrency asset legislation to regulate crypto companies.
• Last week, the Taiwan Financial Supervisory Commission issued guidelines for the cryptocurrency sector to create self-regulatory rules through a potential industry alliance.
• Currently, Taiwan has mandated that virtual asset service providers comply with anti-money laundering laws since July 2021.

Amid growing concerns about cryptocurrency exchanges in Taiwan, legislators aim to complete the drafting of bills by November.

Taiwan Aims to Resolve Regulations Swiftly

Taiwanese lawmakers hope to propose a bill for first reading by the end of November to prevent regulatory arbitrage due to increasing concerns about foreign cryptocurrency exchanges.

Taiwanese Parliament member Yung-Chang Chiang said in an interview today that special cryptocurrency asset legislation is necessary to regulate cryptocurrency companies. He argued that the asset class differs in many ways from traditional financial products and should be overseen by separate, dedicated legislation. Chiang held a public hearing in the parliament today and discussed the draft proposal with cryptocurrency asset service providers, legal experts, and academics.

Last week, the Taiwan Financial Supervisory Commission issued guidelines for the cryptocurrency sector to create self-regulatory rules through a potential industry alliance, but these measures are not legally required. The legislator said, “In this case, under the authority of this special law, regulatory authorities can impose administrative sanctions on businesses that violate self-regulation rules. Without such special legislation, regulators would not have the power to enforce sanctions.”

The proposed special law suggested by Chiang would require all cryptocurrency platforms operating in Taiwan to submit an application for a license. If they fail to do so, regulators could order them to cease operations.

Currently, Taiwan has mandated that virtual asset service providers comply with anti-money laundering laws since July 2021. Otherwise, the cryptocurrency sector remains largely unregulated.

“Still, there are many cryptocurrency platforms in Taiwan that have not declared AML compliance, but without a special law, there is little regulators can do,” said Chiang.

Chiang mentioned that the likelihood of the special law passing through all three readings in this legislative session is low, which is expected to conclude by year-end. He stated, “An election is coming up, and the current legislative session is focusing more on reviewing the government’s budget.”

Taiwan’s FSC may also propose its version of a special cryptocurrency law, but this could happen as early as mid-2024, according to Chiang. He added, “It’s hard to say exactly when the special law will take effect, but it should be sometime after mid-2024.”

Struggling to Access Banking Services

During the same hearing, Damien Ho, Binance’s global head of partnerships, mentioned that many cryptocurrency platforms in Taiwan are still struggling to access suitable banking services. The FSC’s banking bureau had previously warned banks not to treat cryptocurrency platforms as high-risk firms, but “in reality, we still face many difficulties,” Ho said.

Ho suggested, “We boldly recommend the Taiwanese government to encourage certain private or state banks to become more cryptocurrency-friendly and help (cryptocurrency firms) with their relevant affairs,” adding, “This can help the development of cryptocurrency businesses in a more regulated and effective manner.”

Although not regulated in Taiwan, Binance was reported by COINOTAG in August to have applied for registration for AML compliance. Binance appears to have established a local entity named “Binance International Limited Taiwan Branch (Seychelles),” but according to the Taiwan Ministry of Economic Affairs database, the government approved Binance’s company registration on May 12, 2023, with registered capital of TWD 30 million (approximately USD 933,000).

Regulation According to Scale

In today’s public hearing, Winston Hsiao, co-founder and Group CRO of Taipei-based cryptocurrency exchange XREX, stated that compliance is a necessity for the cryptocurrency sector but should be done “step by step.”

According to Hsiao, small-scale organizations should be regulated by self-regulatory rules formulated by the industry alliance after registration. Large-scale organizations should obtain permits under special legislation and apply for specific financial licenses, he said.