Taiwan Introduces Comprehensive Crypto Regulation Law with Tough Penalties

Taiwan's Legislative Yuan passed the Virtual Asset Service Act on June 30, marking a significant step in crypto oversight. The law replaces narrow anti-money laundering rules with full operational and market-conduct standards for virtual asset service providers (VASPs) and stablecoin issuers.

The Act defines seven VASP categories, including virtual asset exchanges, trading platform operators, transfer service providers, custodians, underwriters, lending service providers, and other virtual asset service providers. VASPs must segregate customer assets, comply with internal control and cybersecurity requirements, and undergo regular audits and financial reporting.

Existing VASPs that completed anti-money laundering registration before the law takes effect have a transition period of 12 months to apply for an FSC license. Financial institutions already providing virtual asset services under FSC regulations must also obtain regulatory approval and an operating license within 21 months, or face penalties.

The Act establishes regulatory requirements for stablecoin issuance, including obtaining approval from the Central Bank of the Republic of China (Taiwan) and authorization from the FSC. Issuers must maintain full reserve backing for all issued stablecoins, place reserve assets in trust, undergo regular audits, and comply with periodic information disclosure requirements.