March 27, 2024
Unique Legislation Needed: Taiwanese Lawmaker Advocates for Distinct Crypto Asset Statute
Policy & Regulation

Unique Legislation Needed: Taiwanese Lawmaker Advocates for Distinct Crypto Asset Statute

As worries about offshore exchanges grow, Taiwanese lawmakers hope to put out a draft special law for first reading by the end of November to prevent regulatory arbitrage.

In an interview, Yung-Chang Chiang, a member of Taiwan’s Legislative Yuan, said that a specific crypto asset statute is required to govern crypto companies. He suggested that the asset class differs from a conventional financial instrument in many aspects and should be governed by unique, distinct legislation.

Today, Chiang convened a public hearing in the legislature to consult with academics, legal professionals, and companies that provide virtual asset services about the proposed plan.

Although Taiwan’s Financial Supervisory Commission last week published suggestions for the crypto business to create its self-supervision standards through a prospective industry association, the lawmaker said that such measures lack legal enforcement.

“In this case, under the authority of this special law, regulatory authorities can impose administrative penalties on operators who violate these self-regulation rules. Without such a special law, the regulators would lack the ability to impose penalties,” Chiang further added.

All cryptocurrency platforms operating in Taiwan would need to apply for a permit under the special law Chiang has suggested. Regulators may compel them to stop operating if they don’t.

Since the FSC implemented anti-money laundering guidelines in July 2021, Taiwan has obliged virtual asset service providers to abide by anti-money laundering legislation. Otherwise, there is little regulation of the cryptocurrency business.

According to Chiang, “there are still many crypto platforms that have a presence in Taiwan but have yet to declare AML compliance with the FSC,” adding that authorities have limited options in the absence of a specific regulation.

The present parliamentary session, which is anticipated to terminate before the end of this year, makes it improbable that the special legislation would undergo three readings. “An election is coming up, and the current legislative session focuses more on reviewing the government’s budget,” Chiang stated.

The unique crypto legislation may also be proposed by Taiwan’s FSC, but Chiang estimates that wouldn’t happen until at least mid-2024.

“It’s hard to say exactly when the special law will be enacted, but it should likely occur sometime after the middle of 2024,” Chiang stated.

At the same session, Damien Ho, a representative of Binance’s worldwide partnerships, stated that many cryptocurrency sites in Taiwan continue to struggle to obtain appropriate banking services.

While the FSC’s banking bureau has previously requested that banks refrain from seeing cryptocurrency platforms as very dangerous businesses, Ho remarked that “in reality, we still face many difficulties interacting with banks.”

“We also boldly suggest that the Taiwan government should encourage some private or public banks to become more crypto-friendly and handle [crypto firms’] relevant business,” Ho later added. “This can help crypto businesses develop in a more regulated and effective manner.”

The biggest cryptocurrency exchange in the world, Binance, reportedly applied to register in Taiwan for AML compliance in August.

Despite not being subject to local regulation in Taiwan, Binance has established a regional organization there called “Binance International Limited Taiwan Branch (Seychelles),” according to the database of the Department of Commerce. According to the registration data, Binance’s firm registration with a registered capital of NT$30 million ($933,000) in Taiwan was authorized by the government on May 12, 2023.

Winston Hsiao, cofounder and group CRO of Taipei-based cryptocurrency exchange XREX, stated during the public hearing today that compliance is necessary for the crypto business but that it must be carried out “step-by-step.”

“If we must discuss the special law at this stage, we hope that the law could regulate crypto platforms by their sizes,” Hsiao stated.

According to Hsiao, small-scale organizations should be governed by the self-supervision guidelines created by the industry association after registration.

“For large-scale entities, they should get a permit under the special law and perhaps apply for other relevant financial licenses,” he concluded.

Image: Wallpapers.com

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