Importance of Stablecoin Regulation Insights from Industry Experts on the Future of TWD Stablecoins

Table of Contents
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Concerns of BitoEX CEO Winston Wang regarding the Virtual Asset Act
Potential and current state of stablecoins
The role of stablecoins and real-world currency supply
The necessity of a Taiwanese stablecoin bill
Relationship between economic strength and legal currency issuance
Supply limit and risks of stablecoins
Theoretical and practical supply limits of stablecoins
Acceptance of stablecoins in the Taiwanese financial market
Market share of local banks and public confidence
Winston Wang, CEO of BitoEX Technology, recently expressed his personal concerns regarding Taiwan’s “Virtual Asset Act.” He emphasized his worries about the lack of supervision for stablecoins in the act, despite the extensive discussions it has sparked.

Wang stated that stablecoins play a role in blockchain finance similar to that of real-world currency supply. For example, the current global supply of US dollar stablecoins (such as USDT and USDC) is approximately 150 billion USD, which accounts for only 0.174% of the total M2 supply of USD, which is around 86 trillion USD. This indicates significant room for improvement compared to Circle CEO’s statement about a 10% penetration rate.

( Circle CEO: Stablecoins could be accepted by most jurisdictions as electronic currency representing 10% of the global economy by 2025 )

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Referring to the recent Financial Supervisory Commission’s regulation following the EU’s MiCA regulations, it remains to be seen whether Taiwan’s Financial Supervisory Commission will treat stablecoins as electronic currency, allowing only local entities to issue stablecoins and requiring local custody.

( MiCA to be implemented at the end of the month, Tether CEO concerned about stablecoin operational risks )

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Wang emphasized that the circulation and usage rate of a country’s legal tender directly affect its economic strength. To strengthen economic power, there must be a certain issuance of legal tender or stablecoins. Global financial assets are typically valued using a country’s legal tender or stablecoins. However, Taiwan currently lacks regulatory legislation for stablecoins, and there are no legally issued and used Taiwanese stablecoins. This significantly affects Taiwan’s influence and pricing power in financial products denominated in Taiwanese dollars, potentially causing Taiwan to lose opportunities in the blockchain finance field and be dominated by the US dollar in the long term.

( Hong Kong to regulate stablecoins: entering public consultations and innovation “sandbox” program )

Researcher Yu Zhe-an pointed out that the current supply of risk-free currency (M0) is 5.7 trillion USD. If stablecoins maintain no credit risk, the theoretical supply limit would be 5.7 trillion USD, but the practical limit could be around 1 trillion USD. Additionally, if stablecoin providers are willing to bear credit risk, there would be no theoretical upper limit to the supply. “Another question is, if a new Taiwanese stablecoin can be issued, won’t domestic banking institutions take up the entire market share?” said Yu Zhe-an.

Wang believes that local banks or major payment institutions in Taiwan would likely occupy almost all of the market share. Similar to Japan, Taiwan’s financial market has a high level of closure. If Tether or Circle issue Taiwanese stablecoins compared to the issuance by Taiwanese banks or Fubon Bank, the public would have more confidence in stablecoins issued by local banks. He quoted former Financial Supervisory Commission chairman, Tseng Ming-chung, who stated that the intrinsic value of cryptocurrency companies is still insufficient.

In summary, there is still significant room for improvement in Taiwan’s regulation and issuance of stablecoins. Stablecoins have tremendous potential, and appropriate regulations and supervision will help enhance the international influence and economic strength of the Taiwanese dollar. Wang’s viewpoint emphasizes the importance of stablecoins in blockchain finance and urges the Taiwanese government to pay attention to the formulation of relevant bills. However, there are also other opinions suggesting that the Taiwanese dollar is not a major international currency, and whether there is a demand for stablecoins for cross-border use at this stage still needs to be considered. The current plans for the special law do not disclose any regulatory framework for stablecoins.

( Virtual Asset Management Act is coming: Financial Supervisory Commission unveils four-phase management plan, to be submitted to the Executive Yuan in June 2025 )

Taiwan
Stablecoins
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Further reading
Financial Supervisory Commission’s Peng Keng-lung’s three waves of new policies: promoting Asia’s asset management center and lightweight sandbox
Promoting the tokenization of real-world assets RWA, Financial Supervisory Commission establishes project team