Taiwan's New Crypto Compliance Framework

Taiwan's financial landscape is on the brink of a transformative shift. The Financial Supervisory Commission (FSC) has unveiled a new set of anti-money laundering (AML) regulations specifically targeting virtual asset service providers (VASP).

These rules follow legislative amendments passed in July, setting the stage for a more rigorous compliance environment.

The FSC's statement on Wednesday highlights the urgency of VASPs adapting to these forthcoming changes. All providers are now mandated to register under these AML regulations by the end of September next year.

Failing to comply could lead to dire consequences, including imprisonment for up to two years and hefty fines reaching NT$5 million (approximately $155,900).

Shifting Towards Stricter Oversight

The new regulations, effective January 1, 2025, replace the rules established in July 2021. Kevin Cheng, a prominent crypto lawyer and secretary general of the Taiwan Fintech Association, emphasizes the heightened regulatory obligations.

He notes that non-compliant operators will face criminal liability under the new rules while compliant ones will navigate stricter regulatory waters. "The entire industry environment will gradually move towards the model of licensed financial institutions," Cheng explained.

Raising the Bar for Industry Players

The new framework introduces additional requirements beyond traditional AML obligations. These include specific qualifications for management teams and corporate responsibilities covering transaction security, consumer asset protection, and information security.

Cheng points out that these measures establish higher barriers for entry and ongoing operation within the crypto industry. The enhanced legal protection is expected to make Taiwan's crypto sector more appealing to large investors familiar with traditional finance.

Future Legislative Prospects

The FSC is not stopping with these AML regulations. It is also considering a dedicated law proposal for crypto assets, slated for submission to Taiwan's Executive Yuan by June next year.

The draft proposal is expected to be ready by the end of this year, signaling the FSC's proactive approach to shaping Taiwan's crypto landscape.

Industry Response and Self-Regulation

In an anticipatory move, the local crypto sector formed an industry association in June.

This body aims to develop self-supervisory rules aligned with government guidelines, ensuring a smooth transition into the new regulatory framework. The association's efforts reflect a collaborative spirit within the industry to adapt to and embrace these transformative changes.