The cryptocurrency industry in Taiwan is at a pivotal juncture as the Financial Supervisory Commission (FSC) drafts its long-anticipated Virtual Asset Special Act. With plans to regulate virtual asset businesses under a licensing framework similar to traditional financial institutions, the proposed law includes differentiated capital requirements based on business type. Industry leaders are urging regulators to adopt a balanced, forward-looking approach—ensuring investor protection without stifling innovation.
As the regulatory landscape evolves, stakeholders emphasize the need for reasonable capital thresholds, extended compliance timelines, and flexible oversight mechanisms that accommodate rapid technological change and global competitiveness.
Regulatory Shift: From Registration to Licensing
Under the draft Virtual Asset Special Act, virtual asset service providers (VASPs) will transition from the current anti-money laundering registration system to a full-fledged licensed regime. This shift aligns Taiwan with international standards set by bodies like the Financial Action Task Force (FATF), enhancing transparency and consumer safeguards.
The legislation proposes that existing operators must apply for business permits within six months of the law’s enactment and secure final approval within 15 months—or face mandatory exit from the market. However, industry feedback suggests this timeline may be too compressed.
Industry Appeals for Extended Compliance Timeline
A major player in the virtual asset space has called for an extension of the application and preparation period—from six months to at least one year. The rationale? Building secure infrastructure, strengthening internal controls, and aligning operations with regulatory expectations takes time.
“Given the complexity of our systems and the high stakes involved in safeguarding user assets, a longer runway ensures we can meet compliance standards without compromising operational integrity,” said a senior executive from a leading local exchange.
Echoing this sentiment, Peng Yun-Xian, founder of cryptocurrency exchange HOYA BIT, emphasized the importance of timing. “The industry is still adapting to the new AML registration rules. If the special act can be implemented by late 2026 or even 2027, it would give us much-needed breathing room for system upgrades and organizational readiness.”
Striking the Right Balance: Capital Requirements That Protect and Empower
One of the most debated aspects of the draft law is the proposed differentiated capital threshold for various business models—such as trading platforms, custodians, and payment processors.
Peng highlights a critical balancing act: “Too low a capital requirement may fail to protect customers; too high could kill innovation.” She suggests referencing existing financial regulations, such as the NT$200 million minimum paid-in capital for securities brokers, as a benchmark.
“If we apply a similar standard—say NT$200 million—for crypto exchanges—it would strike a reasonable balance between credibility and accessibility,” Peng explains. “It signals seriousness without creating insurmountable barriers to entry.”
She also proposes a dynamic model: instead of a fixed upfront capital demand, regulators could implement tiered capital rules tied to transaction volume or asset holdings. For instance, platforms could start with a lower threshold but be required to increase capital once they reach certain scale milestones.
This approach supports early-stage growth while ensuring stronger financial backing as risk exposure grows—ideal for nurturing homegrown crypto unicorns.
Flexible Oversight: Encouraging Innovation Without Compromising Safety
As virtual asset businesses become licensed entities, any new service offering will require prior FSC approval—a process that could slow down innovation.
Peng advocates for a risk-based classification system, where low-risk services (e.g., wallet integrations or informational tools) fall under a simplified reporting regime rather than full prior authorization.
“Not every product update should need a regulatory green light,” she notes. “By distinguishing between high-risk and low-risk innovations, we can maintain safety while enabling agility.”
This kind of regulatory flexibility is crucial in a fast-moving sector where speed-to-market often determines global success.
Client Protection at the Core: Safeguards That Build Trust
The Virtual Assets and Tokens Association of Taiwan (VATTA) supports the core objective of the draft law: client asset protection. Key safeguards under consideration include:
- Mandatory third-party custody of user funds
- Segregation of client assets from operational capital
- Transparent margin and leverage policies
These measures aim to prevent misuse of customer deposits and enhance platform resilience during market volatility.
However, VATTA stresses that one-size-fits-all rules may not suit diverse business models. Smaller startups, decentralized platforms, and niche service providers operate differently than large centralized exchanges.
👉 Explore how secure custody solutions are shaping the future of digital asset platforms.
Toward Tiered Regulation: Proportionality Meets Practicality
To foster sustainable growth, the association urges the FSC to adopt a tiered regulatory framework—where compliance obligations scale with business size, complexity, and risk profile.
For example:
- Micro-enterprises might face lighter reporting burdens but stricter activity limitations.
- Mid-tier firms could undergo periodic audits with moderate capital requirements.
- Large-scale operators would adhere to full prudential standards, including stress testing and real-time monitoring.
This graduated model promotes inclusivity while maintaining systemic stability—a win-win for regulators and innovators alike.
Global Ambitions: Can Taiwan Breed the Next Crypto Unicorn?
Taiwan’s tech-savvy talent pool, strong IT infrastructure, and history of semiconductor leadership position it well to become a hub for blockchain innovation.
But regulation will make or break that potential.
“If we create space for experimentation and responsible growth, the next global crypto unicorn could emerge right here,” says Peng. “Digital assets are borderless—our policies should empower local players to compete internationally.”
With thoughtful implementation of the Virtual Asset Special Act, Taiwan has a rare opportunity to build a trusted, innovative ecosystem that attracts investment, talent, and long-term value.
👉 See how leading crypto ecosystems combine compliance with cutting-edge technology to scale globally.
Frequently Asked Questions (FAQ)
Q: What is the Virtual Asset Special Act?
A: It’s a proposed law in Taiwan that would regulate cryptocurrency businesses under a licensing system, setting capital requirements, custody rules, and operational standards to protect investors and ensure market integrity.
Q: Why do companies want longer preparation periods?
A: Transitioning to a licensed model requires significant changes in technology, governance, and risk management. A longer timeline allows firms to upgrade systems properly and avoid rushed, substandard compliance.
Q: How might tiered capital requirements work?
A: Instead of a single high threshold, companies could start with lower capital based on their size and scale up as their transaction volume or user base grows—supporting startups while protecting users.
Q: Will all new crypto services need government approval?
A: Under current proposals, yes. But industry advocates suggest adopting a risk-based approach—where low-risk features only require notification rather than pre-approval—to encourage innovation.
Q: How does this affect small crypto startups?
A: High barriers could limit entry. A tiered system with proportionate rules would help smaller players enter safely and grow sustainably without being overwhelmed by compliance costs.
Q: Is Taiwan falling behind other crypto hubs?
A: Not necessarily. By designing smart, adaptive regulations now, Taiwan can position itself as a trustworthy yet innovative jurisdiction—potentially attracting global projects seeking compliant environments.
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