The Taiwanese legislature has officially passed a comprehensive regulatory framework for the cryptocurrency industry, introducing strict licensing requirements and severe criminal penalties for non-compliance. The Legislative Yuan passed the Virtual Asset Service Act in its third reading on Tuesday, sending the bill to President Lai Ching-te’s desk. The president is expected to promulgate the law within 10 days, after which the cabinet will determine its official effective date.
Under the newly passed act, virtual asset service providers (VASPs) will be required to obtain formal approval from Taiwan’s Financial Supervisory Commission (FSC) before they can operate. According to a statement from the financial watchdog, the legislation introduces significantly stricter standards regarding cybersecurity, the segregation of client assets, and internal corporate controls. This marks a major shift from Taiwan’s current system, which only requires crypto businesses to complete anti-money laundering (AML) registration. Once the law takes effect, existing platforms that have already completed the AML process will be granted a 12-month grace period to apply for a license, and a total of 21 months to secure full FSC approval.
The legislation also takes a firm stance on the stablecoin market, requiring any company seeking to issue or manage stablecoins to obtain dual approval from both the central bank and the FSC. Furthermore, stablecoin issuers will be legally mandated to maintain full reserve backing for their digital assets. To ensure compliance, the law imposes heavy criminal penalties; individuals found illegally operating a VASP or stablecoin service could face up to seven years in prison and fines of up to NT$100 million (10 million (200 million ($6.28 million).
Industry experts note that the law effectively eliminates the regulatory ambiguity that previously allowed many local crypto businesses to operate in a legal gray area. Kevin Cheng, a Taiwanese lawyer and founder of crypto consultancy Harmony Governance Advisors, stated that existing firms will now face much stiffer competition as the law opens the door for traditional financial institutions to enter the crypto ecosystem. Cheng warned that traditional firms possess far more robust financial compliance capabilities, meaning current crypto operators must rapidly strengthen their competitive advantages to survive the influx of established financial giants.
As the sector prepares for this regulatory transition, the Taiwan VASP Association has pledged to collaborate with the government to ensure a smooth implementation. Titan Cheng, chairman of the association and founder of local crypto exchange BitoGroup, confirmed that the industry group will actively assist regulators in drafting specific implementing rules, including guidelines for licensing, personnel management, and internal controls. The association aims to help local firms navigate the upcoming transition period effectively and minimize potential market disruptions.
