Taiwan Prohibits the Purchase of Virtual Currency-Related Securities through Complex Subcontracting Arrangements: Bitcoin, Spot Futures ETFs Under Regulatory Supervision
The long-awaited Bitcoin spot ETF has finally been listed in the United States, with a net inflow of $1 billion in funds and an asset size of $25.9 billion, indicating the enthusiasm of traditional investors for Bitcoin spot ETFs. However, it is now reported that several Taiwanese brokerages have stated that they can no longer purchase Bitcoin through sub-brokerage, cutting off the legitimate channel for Taiwanese investors to invest in Bitcoin.
What is sub-brokerage?
Taiwan not only cannot issue Bitcoin ETFs, but also prohibits the purchase and sale of foreign-issued Bitcoin ETFs through sub-brokerage. So investors can only invest in Bitcoin ETFs through overseas brokerages.
The official name of sub-brokerage is “Trustee Trading of Foreign Securities Business,” which allows investors to open a “sub-brokerage account” with domestic brokerages that have overseas sub-brokerage qualifications instead of flying overseas to open a securities account. After receiving the order, domestic brokerages place orders with foreign brokerages, hence the term “sub-brokerage.”
Because it is done through familiar securities and banks in Taiwan, it is easy to retrieve funds in case of accidents. Therefore, sub-brokerage has always been a common choice for Taiwanese investors to invest in overseas securities.
According to the announcements of brokerages, not only are Taiwanese mutual funds unable to issue Bitcoin ETFs due to regulatory restrictions, but the regulatory authorities have also banned the use of sub-brokerage to buy and sell foreign-issued Bitcoin ETFs, leaving investors with no choice but to invest in Bitcoin ETFs through overseas brokerages.
The announcement by KGI Securities explains that the regulatory authorities have notified that, considering the large price fluctuations and high risks of virtual currency commodities, in order to protect investors, they can only accept orders for selling and not accept new orders for buying foreign securities linked to virtual currency (such as Bitcoin) spot and futures-related commodities.
In 1981, Taiwan authorized the issuance of the “Management Regulations for Securities Brokers to Trustee Trading of Foreign Securities” under Article 44, Paragraph 4 of the Securities Trading Law, officially allowing securities brokers to handle trustee trading of foreign securities, enabling investors to globally allocate their assets through buying and selling foreign securities. And in 2016, non-professional investors were allowed to buy and sell foreign securities, including non-leveraged or short-selling gold ETFs.
According to industry insiders, originally ETFs only had connecting targets for non-professional investors, but since Bitcoin ETFs became a news focus, the Financial Supervisory Commission had to make a statement. The Securities Association is still investigating which Bitcoin ETFs are currently being sold in Taiwan and their current balance.
Without the sub-brokerage channel, Taiwanese investors can only buy and sell Bitcoin ETFs through overseas brokerages. Although opening an account now does not require flying overseas, you can simply apply online with your passport, the disadvantage is that you need to transfer money overseas, and if something goes wrong, you need to communicate directly with the overseas broker. However, the advantage is that the transaction fees are much lower than sub-brokerage, and some can also operate funds, futures, or options.
For more information on overseas investment choices, Mr. Market provides a complete introduction. Interested friends can research online before making a decision.
Bitcoin spot ETF
Sub-brokerage
Further reading:
JPMorgan downgrades Coinbase rating, concerns about ETF disappointment, target price of $80
Grayscale CEO: GBTC as a Bitcoin ETF issuer removes barriers, 1.5% fee is reasonable.
