Nikolas Sargeant
TL;DR
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Taiwan's legislature has passed the Virtual Asset Service Act, creating a comprehensive regulatory framework for the crypto industry.
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Crypto service providers will be required to obtain licenses from the Financial Supervisory Commission (FSC).
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Stablecoin issuers must secure approval from both the FSC and Taiwan's central bank while maintaining full reserve backing.
Taiwan has taken a major step toward regulating its digital asset industry after lawmakers approved the Virtual Asset Service Act, establishing a formal legal framework for cryptocurrency exchanges, stablecoin issuers, and other virtual asset service providers (VASPs).
The Legislative Yuan passed the bill in its third reading on Tuesday, sending it to President Lai Ching-te for final promulgation.
Once signed into law, the legislation will introduce licensing requirements, stricter operational standards, and criminal penalties for violations, providing long-awaited regulatory clarity for Taiwan's crypto sector.
Crypto Firms Must Obtain FSC Approval
Under the new law, companies offering virtual asset services in Taiwan must receive authorization from the Financial Supervisory Commission (FSC) before operating.
The legislation strengthens oversight by introducing new requirements covering:
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Cybersecurity standards
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Segregation of customer assets
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Internal governance and risk controls
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Regulatory supervision of crypto businesses
The FSC said the new framework is designed to improve investor protection while supporting the sustainable development of Taiwan's digital asset market.
Taiwan already requires crypto businesses operating in the country to comply with anti-money laundering (AML) regulations and register their activities.
Once the new law becomes effective:
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Existing AML-registered firms will have 12 months to submit licensing applications.
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Companies will then have 21 months to obtain FSC approval and any additional required licenses.
The phased implementation is intended to give existing businesses time to transition into the new regulatory framework.
Stablecoin Issuers Face New Oversight
The legislation also introduces dedicated rules for stablecoins. Companies wishing to issue or manage stablecoins must:
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Obtain approval from both the Financial Supervisory Commission and Taiwan's central bank.
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Maintain full reserve backing for issued stablecoins.
The new requirements aim to strengthen financial stability and improve confidence in stablecoin-backed digital payment systems.
One of the most significant aspects of the legislation is the introduction of criminal sanctions for serious violations.
According to the law:
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Operating an unlicensed virtual asset service or issuing stablecoins without approval may result in up to seven years in prison and fines of up to NT$100 million (approximately $3.14 million).
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Fraud and cryptocurrency market manipulation carry prison sentences ranging from three to 10 years, along with fines between NT$10 million ($314,000) and NT$200 million ($6.28 million).
The tougher penalties reflect Taiwan's effort to deter illegal activity while strengthening confidence in its regulated crypto market.
Kevin Cheng, a Taiwanese lawyer and founder of crypto consultancy Harmony Governance Advisors, said the legislation will eliminate much of the legal uncertainty that previously surrounded the industry.
According to Cheng, businesses that once operated under regulatory ambiguity will now need to comply with clear licensing and operational requirements.
He also expects increased competition as the new framework allows traditional financial institutions to enter the virtual asset sector.
Banks and other established financial firms could leverage their compliance expertise to compete directly with existing crypto-native businesses.
Titan Cheng, chairman of the Taiwan VASP Association and founder of crypto exchange BitoGroup, said the industry group plans to work closely with regulators during implementation.
The association will assist in developing detailed regulations covering:
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Licensing procedures
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Personnel requirements
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Operational standards
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Internal control frameworks
It also aims to help crypto companies navigate the transition period while minimizing disruption to Taiwan's digital asset ecosystem.
