Byline: Hannah Parker
Taiwan’s cryptocurrency sector has announced plans to establish an industry association with its financial regulator, which is expected to release guidelines. Nine crypto exchanges in Taiwan have launched a crypto industry association.
In a joint announcement, nine crypto firms mentioned that they plan to apply to establish an industry association, which will become effective in October after the government issues its crypto framework. The preparatory group for the association was formed in early September, and MaiCoin Group, BitoGroup and Ace Exchange became the first three founders of the Taiwan Virtual Asset Platform and Transaction Business Association.
Overview
Taiwan has required virtual asset services providers (VASPs) to comply with anti-money laundering (AML) since the Financial Supervisory Commission (FSC) introduced AML rules in July 2021. Otherwise, Taiwan’s industry remains largely unregulated. By the end of September, the FSC anticipates and expects the release of crypto trading and payment guidelines. Besides the three named above, nine crypto exchanges are currently represented in the preparatory group, including Bit, Hoya, Shangbito, Xrex, Bitgin, and Rybit.
The association intends to represent exchanges, financial investment platforms, wallet hosting companies, and other crypto businesses while advocating for the industry’s interests. President of Ace Exchange, Wang Chenhaun, highlighted that the association is a family and a beacon, “it guides us in the direction, collects information, sets standards, builds consensus, speaks on our behalf, and leads us to further progress.”
Taiwan Crypto Exchanges from the Working Group
The FSC of Taiwan created a draft of ten guiding principles for the management of digital currencies in the country. In this, the Commission mandated separate custody of customer and platform assets and specified that VASPs should keep in line with the country’s AML regulations. Co-founder and group CEO of Taipei-based crypto exchange XREX, Wayne Huang, highlighted that the FSC’s upcoming guidelines could “give birth to a new industry, providing this new industry legitimacy, oversight, a solid path to grow, and an accelerated means to acquire public trust.”
The draft guideline included enhanced information disclosure and required operators to set standards for reviewing listing and delisting. Amongst the principles established by the FSC is a rule prohibiting VASPs from illegally soliciting business in Taiwan. The FSC proposed that overseas crypto platforms that do not have a company registration within Taiwan and do not comply with its AML laws should not solicit business in Taiwan or from its residents. The report emphasized that the FSC will refer to international practices and will consider amendments within its regulations when needed in the future.
The proposed guidelines emphasize customer protection and suggest a requirement for specific hot and cold wallet ratios for customer deposits with crypto exchanges. This move seeks to ensure the safety of customer funds. Moreover, the guidelines proposed mandatory insurance against user losses, further bolstering consumer confidence. Additionally, the guidelines suggest a ban on stablecoins tied to the Taiwan dollar. Restrictions on foreign exchange advertising in Taiwan were included. The move was made to stabilize the Taiwanese financial system and prevent consumers from being misled by deceptive advertising.
On September 19 2023, a draft plan for the working group revealed that the industry association once set up plans to cover more types of crypto firms, including custody services providers, quantitative trading companies, wealth investment platforms, and over-the-counter trading platforms.
According to the Ministry of Interior’s national professional group application regulations, the association had clear procedures and rules for its establishment. In August 2023, it was announced that a new category for virtual currency business was added to the classification standards of business groups, “it is hoped that the Taiwan Virtual Asset Platform and Transaction Business Enterprise (VASP) Association will be formally established before the end of this year.”
In March 2023, the Chairperson of the FSC, Huang Tien-mu, mentioned the FSC would assume the responsibility of Taiwan’s primary crypto regulator.
Upcoming Guidelines
Earlier this year, the official stressed that the FSC’s upcoming regulatory framework for crypto will include significant policies and rules, including separate company assets and customer funds. During an interview with experts at Bitcode Method Official, a government official confirmed that the FSC plans to restrict offsite crypto exchanges from operating onshore without proper compliance registration as part of its upcoming guidelines.
In August 2023, Binance, the world’s leading crypto exchange, applied for registration in Taiwan under the Money Laundering Control Act and the FSC. Binance operates in the country through a local entity called Binance International Limited Taiwan Branch (Seychelles).
The move by Taiwan regulators shows how dedicated they are to consumer protection and ensuring the safety of consumer funds in the crypto space. The planned guidelines by the Financial Supervisory Commission aim to introduce a set of rules on crypto trading and payments by the end of September 2023.
