Taiwan’s Legislative Yuan passed the Virtual Asset Service Act on its third reading on June 30, moving crypto oversight beyond narrow anti-money-laundering rules.

The law rewrites how virtual asset service providers (VASPs) and stablecoin issuers operate, introducing licensing requirements, reserve rules, and criminal penalties.

Taiwan Lawmakers Pass Sweeping Crypto Regulation Law

The Financial Supervisory Commission (FSC) said the framework lifts supervision of virtual asset service providers (VASPs) from a money-laundering focus toward full operational and market-conduct standards.

The Act defines seven VASP categories, spanning:

• Virtual asset exchanges
• Trading platform operators
• Transfer service providers
• Custodians
• Underwriters
• Lending service providers
• Other virtual asset service providers

The law requires VASPs to segregate customer assets and comply with internal control, cybersecurity, audit, and financial reporting requirements.

The Act grants a transition period to existing VASPs that completed anti-money laundering (AML) registration before the law takes effect, as well as financial institutions already providing virtual asset services under FSC regulations. 

These entities must apply for an FSC license within 12 months of the Act’s implementation. They must also obtain regulatory approval and an operating license within 21 months. If necessary, the licensing deadline may be extended once by up to three additional months.

Meanwhile, the Act also establishes regulatory requirements for stablecoin issuance. It requires entities seeking to issue stablecoins in Taiwan to obtain approval from the Central Bank of the Republic of China (Taiwan) and authorization from the FSC.

Furthermore, 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.

“At the same time, issuing stablecoins within the Republic of China will help Taiwan align with international standards and secure a place in the global virtual asset market, greatly benefiting the long-term, sound development of Taiwan’s virtual asset market,” the press release said.

Penalties escalate sharply for misconduct. Fraud or price manipulation carries a sentence of 3 to 10 years in prison, plus fines of NT$10 million to NT$200 million ($314,000 to US$6.3 million).

The Executive Yuan will determine when the legislation comes into force.

Source: BeInCrypto