Taiwan passes law regulating cryptocurrency firms, stablecoins

Taipei, June 30 (CNA) The Legislature on Tuesday passed a law establishing a regulatory framework for Taiwanese cryptocurrency businesses, including licensing requirements for virtual asset service providers (VASPs) and stablecoin issuers, as well as penalties for fraud and market manipulation.

Under the act, VASPs must obtain approval from the Financial Supervisory Commission (FSC) before operating and comply with requirements on internal controls, cybersecurity and business continuity.

Existing VASPs that have completed anti-money laundering registration before the law takes effect will have 12 months to apply for licenses and 21 months to obtain regulatory approval.

The act, proposed by the Cabinet on April 2, also establishes Taiwan's first legal framework for stablecoins, virtual assets pegged to one or more fiat currencies.

Stablecoin issuers will be required to maintain full reserve backing, with segregated reserve assets held in trust by domestic financial institutions. The reserve assets are protected from claims by other creditors if the issuer enters bankruptcy.

Issuers must also undergo regular audits and are prohibited from paying interest or other returns to holders.

Illegally operating a VASP or issuing stablecoins is punishable by up to seven years in prison and a fine of up to NT$100 million (US$3.14 million).

Fraud or manipulation of virtual asset prices or supply and demand is punishable by three to 10 years in prison and fines ranging from NT$10 million to NT$200 million, according to the act.

Lawmakers also adopted a nonbinding resolution requesting the FSC to submit, within one year, a plan to allow virtual asset firms to offer cryptocurrency derivatives.