The cryptocurrency industry in Taiwan is urging regulators to adopt a balanced and flexible approach as the Financial Supervisory Commission (FSC) drafts its long-anticipated Virtual Asset Special Act. With plans to classify virtual asset businesses as licensed financial institutions and impose differentiated capital thresholds based on business type, stakeholders are advocating for reasonable entry barriers and extended compliance timelines to nurture innovation and protect market vitality.
As the regulatory framework takes shape, industry leaders emphasize that overly stringent requirements could stifle growth—especially among emerging platforms aiming to scale globally. Instead, they propose a tiered, risk-based model that supports responsible innovation while ensuring investor protection.
Regulatory Framework Takes Shape
Under the proposed Virtual Asset Special Act, virtual asset service providers (VASPs) will be required to obtain official licenses similar to traditional financial institutions. The FSC intends to set varying minimum capital requirements depending on the nature of operations—such as trading, custody, or brokerage services.
Existing operators would have six months from the law’s enactment to apply for business permits and a total of 15 months to fully comply with licensing conditions. Failure to meet these deadlines would result in mandatory market exit.
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While the regulatory direction signals increased legitimacy for the sector, many industry players argue the timeline is too tight given the complexity of upgrading internal controls, cybersecurity infrastructure, and compliance systems.
Industry Pushes for Extended Compliance Period
A major domestic crypto platform has called for extending the application preparation period from six months to at least one year. This extension would allow firms sufficient time to align their operations with regulatory expectations without disrupting service continuity.
彭云嫻 (Peng Yun-hsien), founder of cryptocurrency exchange HOYA BIT, echoed this sentiment in an interview with Central News Agency. She noted that many businesses are still adapting to Taiwan’s recent anti-money laundering (AML) registration regime. Introducing another major regulatory shift without adequate lead time could strain resources and hinder long-term stability.
“Given the pace of technological change and operational complexity,” Peng said, “an effective implementation date of late 2026 or even 2027 would give the industry much-needed breathing room.”
This phased transition would enable platforms to implement robust Know Your Customer (KYC), transaction monitoring, and asset segregation mechanisms—critical components under the new law.
Balancing Capital Thresholds: Protection vs. Innovation
One of the most debated aspects of the draft legislation is the proposed capital adequacy standards. While safeguarding user assets is paramount, setting thresholds too high could exclude promising startups and consolidate market power among a few well-funded players.
Peng suggested referencing existing financial regulations for guidance. For instance, Taiwan’s securities brokers are required to maintain a minimum paid-in capital of NT$200 million (approximately USD $6.4 million). Applying a similar benchmark to crypto exchanges could strike a reasonable balance between credibility and accessibility.
“If the bar is set too low, consumer protection may be compromised,” she explained. “But if it's excessively high, we risk killing off innovation before it has a chance to grow.”
To address this tension, she proposed a dynamic model: start with a moderate baseline capital requirement and mandate incremental increases once trading volume or user base reaches predefined thresholds. Such a mechanism would ensure scalability while maintaining financial resilience.
Advocating for Tiered Regulation and Innovation-Friendly Policies
The Virtual Currency Association has also weighed in, supporting a risk-proportionate regulatory framework. It emphasizes that one-size-fits-all rules fail to account for differences in business models, scale, and risk profiles across the ecosystem.
The association recommends adopting a tiered supervision model, where compliance obligations scale with company size and operational complexity. Smaller platforms with limited offerings could operate under lighter reporting burdens, while larger exchanges handling high-volume trades face stricter audits and capital rules.
Moreover, the group urges regulators to allow certain low-risk services—like wallet integration or price indexing—to be introduced via notification-based procedures rather than requiring full prior approval. This would accelerate product development and keep Taiwan competitive in the fast-moving Web3 landscape.
“Crypto knows no borders,” Peng remarked. “If Taiwan wants to become a hub for blockchain innovation, we need policies that encourage experimentation and global ambition.”
With the right mix of oversight and flexibility, she believes the next generation of crypto unicorns—startups valued at over $1 billion—could emerge from Taiwan’s vibrant tech ecosystem.
Building Trust Through Adaptive Oversight
The proposed law includes key safeguards such as mandatory asset custody arrangements and margin protection protocols. These measures aim to prevent misuse of client funds—a critical concern following past exchange collapses worldwide.
However, regulators must also recognize that virtual assets evolve rapidly. A rigid legal framework risks becoming obsolete within years. Therefore, stakeholders recommend establishing a living regulation model, where rules are reviewed and updated regularly based on market developments and technological advances.
This adaptive approach has proven effective in jurisdictions like Singapore and Switzerland, where regulators collaborate closely with industry through sandbox programs and policy dialogues.
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FAQ: Understanding Taiwan’s Virtual Asset Regulatory Shift
Q: What is the Virtual Asset Special Act?
A: It's a proposed law by Taiwan’s Financial Supervisory Commission to regulate cryptocurrency businesses under a licensed framework, similar to banks and securities firms.
Q: Will all crypto companies need a license?
A: Yes, any entity offering virtual asset services—such as trading, custody, or brokerage—will need FSC approval to operate legally in Taiwan.
Q: How much capital might exchanges need?
A: While not finalized, suggestions range from NT$100 million to NT$200 million. The final amount will likely depend on service type and risk level.
Q: Why do companies want longer preparation time?
A: Upgrading cybersecurity, compliance systems, and internal controls takes significant time and investment. A 15-month window may not be enough for full readiness.
Q: Could Taiwan produce a crypto unicorn?
A: With supportive policies, strong tech talent, and access to international markets, Taiwan has the potential to incubate globally competitive blockchain startups.
Q: Are there plans for regulatory sandboxes?
A: Not officially announced yet, but industry groups are advocating for innovation-friendly zones where new products can be tested under supervision.
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Final Thoughts
As Taiwan stands at the crossroads of financial innovation and regulatory responsibility, the path forward must balance prudence with vision. By setting realistic capital thresholds, allowing phased compliance, and embracing adaptive governance, regulators can foster an environment where trust and innovation coexist.
The goal isn’t just compliance—it’s cultivating homegrown champions capable of competing on the world stage. With thoughtful policy design, Taiwan may soon witness the birth of its first cryptocurrency unicorn.