The virtual asset industry in Taiwan is on the brink of a transformative shift. The Financial Supervisory Commission (FSC) is actively drafting a specialized law that will introduce a licensing system for virtual asset service providers (VASPs). This move signals the end of an era for individual currency traders and the beginning of a new, regulated framework designed to protect investors and foster market growth.
Understanding the Upcoming Virtual Asset Specialized Law
The FSC’s proposed legislation aims to bring virtual asset businesses under a regulatory structure similar to that of traditional financial institutions. Once enacted, existing virtual asset service providers will have a six-month window to apply for a business license from the FSC. They must obtain both business approval and an official license within a total of 15 months. Those who fail to meet these requirements will be required to exit the market.
This shift is part of a broader global trend toward regulating digital assets. With the new U.S. administration showing a favorable stance toward cryptocurrency, international momentum is building. Taiwan’s FSC has adopted a “cautiously friendly” approach, seeking to balance innovation with investor protection.
Key Features of the New Regulatory Framework
Licensing and Capital Requirements
The specialized law will categorize virtual asset businesses into different types, such as exchanges, trading platforms, transfer services, custodians, and underwriters. Each category will have its own minimum capital requirements. These measures are intended to ensure that only financially stable and compliant operators can participate in the market.
The shift to institutional management means that individual currency traders—often operating without oversight—will no longer be permitted. This change is expected to reduce fraud and increase overall market credibility.
Inclusion of Stablecoins
One significant update in the draft law is the inclusion of stablecoins. These are virtual assets whose value is pegged to stable assets like fiat currencies. Previously excluded from FSC guidelines due to potential overlaps with central banking authority, stablecoins will now be jointly supervised by the FSC and the Central Bank of the Republic of China (Taiwan).
Stablecoins serve as a bridge between traditional finance and the virtual asset ecosystem. Their regulation is a critical step toward mainstream adoption.
Client Asset Protection and Information Disclosure
The draft law reinforces existing guidelines requiring the separation of client assets from company funds. Service providers must also adhere to strict information disclosure standards. These rules are designed to safeguard investor interests and build trust in the market.
Enhanced confidence in the regulatory framework is likely to attract new investors beyond the traditional crypto community, potentially boosting market liquidity and growth.
The Road to Regulation
The push for regulation gained urgency following the collapse of major crypto platforms like FTX, which left investors worldwide facing significant losses. In March 2023, Taiwan’s Executive Yuan designated the FSC as the primary regulator for virtual asset platforms with financial investment or payment functions.
Since then, the FSC has pursued a gradual regulatory approach:
- Publishing industry guidelines in Q3 2023
- Encouraging the formation of industry associations and self-regulatory rules
- Transitioning from anti-money laundering compliance statements to a registration system starting November 30, 2024
The next step is the enactment of the specialized law. The FSC plans to hold public hearings with industry and academic stakeholders in February, followed by an official draft announcement in March. The goal is to submit the final draft to the Executive Yuan by June 2025. After approval, the law will proceed to the Legislative Yuan for review and the President for promulgation.
What This Means for Investors and the Market
The new regulatory framework is expected to bring several benefits:
- Increased investor confidence through stricter oversight
- Reduced risk of fraud and platform failures
- Mainstream adoption of virtual assets as a legitimate asset class
However, existing operators must prepare for higher compliance costs and more rigorous operational standards. The 15-month transition period provides time for adaptation, but those who cannot meet the new requirements will need to wind down their operations.
For investors, this means a safer and more transparent environment. As the regulatory landscape evolves, staying informed will be key to navigating these changes successfully. 👉 Explore regulatory updates and market insights
Frequently Asked Questions
What is the virtual asset specialized law?
The virtual asset specialized law is a proposed regulation in Taiwan that will introduce a licensing system for virtual asset service providers. It aims to enhance investor protection and market integrity by imposing capital requirements, operational standards, and disclosure rules.
How will the new law affect individual currency traders?
Individual currency traders will no longer be allowed to operate once the law takes effect. The new framework requires all virtual asset businesses to be institutionally managed and licensed by the FSC.
What are stablecoins, and why are they included in the new law?
Stablecoins are virtual assets pegged to stable reserves like fiat currencies. Their inclusion reflects their growing importance as a bridge between traditional finance and digital assets. The FSC and Central Bank will jointly oversee their regulation.
What happens to existing virtual asset businesses during the transition?
Existing businesses have six months to apply for a license and 15 months to obtain full approval. Those that fail to comply must cease operations.
How will the new regulations protect investors?
Rules on asset segregation, information disclosure, and capital adequacy are designed to prevent mismanagement and fraud. These measures aim to build trust and encourage broader participation in the virtual asset market.
When will the specialized law come into effect?
The FSC plans to submit the draft to the Executive Yuan by June 2025. After approval by the Executive Yuan and Legislative Yuan, the law will be promulgated by the President. The exact effective date will depend on the legislative process.