Virtual Asset Management Bill introduced in the Taiwan parliament

• The Bill focuses on customer protection, regulatory obligations, and industry self-regulation.
• Major crypto exchanges in Taiwan had previously formed the Taiwan Virtual Asset Platform and Transaction Business Association.
• Taiwan’s Financial Supervisory Commission (FSC) also recently issued industry guidelines for VASPs.

In a recent move to enhance oversight and customer protection in the cryptocurrency industry, Taiwanese legislators introduced the Virtual Asset Management Bill to the unicameral parliament, the Legislative Yuan, on October 25, 2023.

The bill aims to establish clear guidelines for virtual asset service providers (VASPs) while fostering industry growth.

Key provisions of the bill

The 30-page bill outlines several important provisions:

• Customer Protection: The bill emphasizes the need for better customer protection within the cryptocurrency industry. It requires virtual asset service providers to separate customer funds from their reserve funds, ensuring transparency and security.
• Regulatory Obligations: VASPs are expected to establish internal control and audit systems to maintain compliance. Joining the local trade association is also encouraged to foster industry self-regulation.
• Stablecoins and Advertising: Notably, the bill does not mandate stablecoin issuers to maintain a 1:1 reserve ratio, showing flexibility in this aspect of regulation. Additionally, the rules for advertising are to be determined by the competent authority, granting flexibility in marketing activities.
• Licensing and Fines: VASPs operating without a license face fines ranging from 2 million to 20 million Taiwanese dollars. Existing market players have a six-month window to obtain the required license after the bill becomes law.

Prior attempts by industry participants to self-regulate

The introduction of the Virtual Asset Management Bill closely follows the creation of the Taiwan Virtual Asset Platform and Transaction Business Association, which represents a collaborative effort by major cryptocurrency exchanges in Taiwan.

MaiCoin, BitoGroup, Ace Exchange, BitstreetX, Hoya Bit, Bitgin, Rybit, Xrex, and Shangbito joined forces to support the cryptocurrency industry and engage with regulators. The association was created with the aim of guiding the industry, setting standards, and building consensus.

In September 2023, Taiwan’s Financial…