Taiwan passes Virtual Asset Service Act, tightens crypto rules

Taiwan’s legislature approved the 56-article Virtual Asset Service Act on June 30, creating the island’s first standalone law for virtual assets and naming the Financial Supervisory Commission (FSC) as the sole regulator. Operating as a virtual asset service provider or issuing stablecoins without authorization carries penalties of up to seven years’ imprisonment and fines up to NT$100 million (about $3.1 million). The law replaces the previous anti-money-laundering registration system with a mandatory licensing regime for all virtual asset service providers.

Under the new regime, exchanges, custodians, wallet operators and similar firms must obtain FSC approval and meet requirements for internal controls, cybersecurity and business continuity. Providers must secure separate licenses in seven service categories — exchange, trading platform, transfer, custody, underwriting, lending and other services — ending the practice of covering multiple activities under a single registration. Operators are required to implement governance and transaction monitoring systems before offering services.

The act establishes Taiwan’s first stablecoin framework and restricts domestic issuance to banks. Stablecoins issued in Taiwan must be pegged only to fiat currencies and backed one-to-one by reserves held separately from company funds and placed in trust with domestic financial institutions. Stablecoins issued abroad will be treated as regulated commodities and must receive FSC approval before listing on licensed exchanges.

The FSC must draft roughly nine pieces of secondary legislation and related implementing rules to operationalize the regime; those rules are expected to be completed by early 2027. Eight incumbent firms that previously completed AML registration will have a transition window: they must apply for licenses within 12 months of the law taking effect and obtain certification within 21 months, with a possible three-month extension. The Virtual Asset Service Provider Association will assist firms during the rollout and will operate committees for listing review, discipline and fraud-prevention compliance.

Lawmakers adopted a nonbinding resolution asking the FSC to present, within one year, a plan to permit licensed firms to offer cryptocurrency derivatives. The FSC’s consolidated role centralizes licensing, supervision and product approvals that had previously been managed by multiple agencies.