FSC Acknowledges Only Three VASPs Registered under the Regulatory Framework, According to Peng Jinlong: The Focus Shifts from Anti-Money Laundering to Institutional Governance
The New Year press conference hosted by the Financial Supervisory Commission (FSC) on January 22 was chaired by Chairman Peng Chun-Lung. When asked about the high registration threshold for virtual currency operators in Taiwan, which has discouraged many businesses, the issue of unregulated overseas exchanges still operating in Taiwan was raised.
(FSC: Stablecoins and Bitcoin ETFs to Be Regulated under the Virtual Currency Act – Observation Period of Six Months)
FSC: Only Three Companies Have Applied for Registration
According to the FSC, since the promotion of the registration system, it has started accepting registrations since November 2024. Currently, only three companies have applied, and it is expected that more companies will complete the registration by the end of March 2025. It is emphasized that virtual asset transactions need to be localized in Taiwan, and even if they involve overseas transactions, it is hoped that registration will be done locally to enhance the ability to monitor money flow and currency flow.
Challenges in Regulating Overseas Exchanges
As seen in the market, overseas exchanges such as Bybit, Bitget, Binance, and OKEX still attract a large number of Taiwanese investors, especially the younger generation. Even if overseas exchanges cannot meet the requirements of Taiwanese regulations and give up local operations, there is still a large amount of funds flowing overseas.
Possible Actions
To address the issues of overseas exchanges and capital outflows, the following measures can be considered:
1. Increasing the competitiveness of local exchanges:
– Lowering the cost of compliance and regulatory requirements to encourage more businesses to operate in Taiwan.
– Providing tax and regulatory incentives to attract participation from local and international businesses.
2. Strengthening the regulation of overseas exchanges:
– Enhancing the tracking of money flow from Taiwanese investors using overseas exchanges.
– Restricting access to overseas websites.
– Cooperating with international financial institutions to promote information sharing and anti-money laundering actions.
3. Educating young Taiwanese investors about the potential risks of overseas exchanges (such as asset security and insufficient regulatory protection), while encouraging compliant businesses to develop encrypted assets and innovative financial products that meet the needs of young people and encourage investment in the local financial market.
Peng Chun-Lung: Transition from Anti-Money Laundering to Institutional Management
FSC Chairman Peng Chun-Lung stated that the first three stages of virtual currency regulation in Taiwan focused on anti-money laundering, but the fourth stage will shift the focus to institutional management. The goal of the anti-money laundering phase is primarily to prevent money laundering and illegal fund flows through behavior management. The registration system serves as an “upgraded version of anti-money laundering,” requiring businesses to verify identities and operate in compliance. However, this approach has limitations, as the current focus of regulation is on behavior norms rather than comprehensive institutional management, and there are no specific regulations regarding the organizational scale, operating models, and capital requirements for businesses.
The fourth stage will introduce special legislation to establish institutional management as the core, similar to the institutionalized management models of insurance companies, banks, or securities firms. It will set clear conditions, standards, organizational forms, and compliance norms, gradually promoting the regularization and stable development of the industry. This will facilitate market integration, eliminate non-compliant businesses, and improve service quality, establishing long-term stability and investor trust in the market.
International References for Special Legislation
Peng Chun-Lung stated that the core content of the special legislation includes:
– Setting conditions and standards for businesses, including requirements for founders, capital requirements, and internal control mechanisms.
– Focusing on “institutional supervision” and specifying operational norms and responsibilities for Virtual Asset Service Providers (VASPs).
– Protecting investor rights and promoting market fairness and transparency.
The development of the special legislation draws from the European Union’s Markets in Crypto-Assets Regulation (MiCA), incorporating relevant standards and design concepts. It balances the characteristics of the Taiwanese market with international regulatory trends, ensuring the global applicability and competitiveness of the special legislation. Public hearings will begin in February to gather opinions from all sectors, and the draft legislation will be completed and submitted for review by the Executive Yuan in June.
Risk Warning
Cryptocurrency investments carry a high level of risk, and prices may fluctuate dramatically, potentially resulting in the loss of the entire principal. Please carefully evaluate the risks.
