<p>Taiwan has furthered its efforts on the path of digital asset regulation, as the nation’s legislature introduced a cryptocurrency bill for its inaugural reading.</p><p>The “Virtual Asset Management Ordinance Draft” bill represents a significant stride toward establishing a legal framework for digital assets in the country. The proposal passed its first reading at the Taiwanese state legislature, according to published <a href="https://ppg.ly.gov.tw/ppg/bills/202103224730000/details" rel="noopener noreferrer nofollow">parliamentary records</a>.</p><h2 id="header-0">Bill objectives</h2><p>The primary objectives of the bill are to define virtual assets, establish operational standards for asset operators, enhance customer protection, and make it mandatory for industry players to join relevant associations and secure regulatory permissions.</p><p>Up until now, Taiwan has maintained a relatively hands-off approach to the cryptocurrency sector. Its oversight was limited to existing know-your-customer (KYC) and anti-money laundering (AML) laws. However, this stance evolved following the collapse of the cryptocurrency exchange FTX in November. The platform’s popularity among Taiwanese users, owing to favorable US dollar interest rates compared to local banks, led to increased regulatory scrutiny.</p><p>A member of Taiwan’s parliament, Yung-Chang Chiang, <a href="https://www.theblock.co/post/259726/taiwan-officially-proposes-crypto-bill-with-first-reading-passed-at-parliament" rel="noopener noreferrer nofollow">told</a> The Block that “after the first reading of the bill, discussions on the regulatory framework for the virtual asset industry have progressed to the next stage.” Chiang added:</p><p>“We hope that the Financial Supervisory Commission can also submit their version of a draft bill to the legislature, allowing various sectors of society to further consolidate consensus during the process.”</p><p>In contrast to cryptocurrency regulations in neighboring Hong Kong, Taiwan’s bill does not adopt a strong stance on derivatives or stablecoins. Nevertheless, it recognizes that derivatives linked to virtual assets possess unique characteristics, with a specific mention of perpetual contracts. This recognition opens the door for the possibility of cryptocurrency derivative-specific regulation in future drafts.</p><p>Importantly, the bill does not restrict the trading of virtual assets to professional investors, which allows broader participation in the digital asset market.</p><h2 id="header-1">Auditing and segregation of funds</h2><p>Unlike Japan, which mandates the use of custodians for locally licensed exchanges, the draft bill in Taiwan only necessitates the segregation of customer assets from business funds. It does not explicitly require the involvement of third-party custodians.</p><p>Under this legislation, exchange operators will be obliged to commission periodic reports from accountants regarding their operations and asset management. Additionally, regulators, such as the Financial Supervisory Commission (FSC), will have the authority to conduct regular inspections of exchange internal control and audit systems.</p><p>Although this initial draft does not explicitly mention “Proof of Reserves,” it does indicate that the regulator will establish standards for asset ratios after consulting with industry stakeholders, with the expectation that licensed exchanges will adhere to these standards.</p><h2 id="header-2">Fostering self regulation</h2><p>Taiwan’s crypto industry stakeholders have expressed their support for formal regulatory oversight. Wayne Huang, co-founder and CEO of Taipei-based fintech company XREX, recently <a href="https://medium.com/&#64;coinness.gl/upcoming-regulatory-framework-in-taiwan-sees-crypto-exchanges-unite-b83f7222476" rel="noopener noreferrer nofollow">affirmed</a> the industry’s willingness to collaborate with the FSC in defining regulatory operations.</p><p>In tandem with the establishment of a regulatory framework, regulators have indicated that they want industry stakeholders to move towards some level of self-regulation. That led nine exchange businesses to form an industry association last month.</p><p>The bill’s second reading is pending, and the FSC is anticipated to provide its input and recommendations before the next phase of the legislative process.</p>

Taiwan Advances Crypto Regulation with Initial Reading of Digital Asset Bill

Table of Contents

CoinNess Global

Other articles published on Oct 28, 2023

Expert Says ‘Chainlink Is Killing It’ as LINK Faces Final Major Resistance

South Korea’s Crypto Frenzy: Altcoins Trump Bitcoin Among 6 Million Investors

Galaxy Digital; Led by Mike Novogratz – Betting Big on Bitcoin and Ethereum: Lookonchain

WEMIX enters into strategic partnership with Chainalysis

ChartAI Joins NVIDIA Inception

Ripple’s Swell Event Sparks IPO Speculation: What Does This Mean for XRP?

Join our free newsletter for daily crypto updates!