Crypto License in Taiwan

General information about the Taiwan crypto license

The Financial Supervisory Commission (FSC), formed on July 1st, 2004, is in charge of overseeing the nation’s financial markets, including the cryptocurrency sector. It was established to bring together several regulatory agencies to effectively manage the rapidly growing financial industry. It guarantees financial stability by controlling securities markets, banking, and insurance. This further encourages the growth of financial markets.

Beyond the FSC, many governmental agencies oversee Taiwan’s cryptocurrency business. Though cryptocurrencies are not accepted as legal money, the Central Bank of the Republic of China (Taiwan) monitors transactions. It also provides several pertinent recommendations. The nation’s Ministry of Justice (MOJ), which upholds anti-money laundering (AML) regulations, ensures continued compliance. Finally, promoting self-regulation, the Taiwan Virtual Asset Service Provider Association (TVASPA) serves as a link between the government and the crypto sector.

Although they are acknowledged as investment assets and governed in a different fashion, cryptocurrencies are not accepted as legal tender in Taiwan. Since 2013, the FSC has introduced many new policies and issued several announcements to clarify that cryptocurrencies are perceived as virtual goods rather than official cash.

Key applicable laws include:

• Anti-Money Laundering (AML) Regulations – Crypto platforms must comply with AML regulations under the Money Laundering Control Act. This requirement has been in effect since November 7, 2018. The scope of businesses covered under the AML Act was further clarified by the Executive Yuan on April 7, 2021. These regulations took effect on July 1, 2021.
• Securities and Exchange Act (SEA) – Applicable in case a cryptocurrency is deemed a security token.
• Security Token Offering (STO) Regulations – Issued in 2019, these specify compliance measures for security tokens.

Registered businesses must follow rigorous AML and KYC rules as advised by the FSC and other relevant authorities, even if there is no particular license needed for running a crypto exchange or money transfer service in Taiwan. These include setting up internal control systems, tracking dubious transactions, and guaranteeing real-name confirmation for most transfers.

There is no minimum share capital required, and there are many other advantageous points when it comes to this jurisdiction.

The Legality of Cryptocurrency Business in Taiwan

When it comes to crypto, the Financial Supervisory Commission (FSC) is the main regulating body. It was formally designated as the principal cryptocurrency regulator in March 2023.

Relevant laws include:

Anti-Money Laundering (AML) Laws. Starting July 1, 2021, the anti-money-laundering rules for crypto firms went into effect. Money Laundering Control Act compliance is now a legal requirement for VASPs.

Guiding Principles for Crypto Firms. The FSC published updated guiding principles in September 2023. The goals of “Guidelines for the Administration of Virtual Asset Service Providers" were clear: making the cryptocurrency sector more transparent and bolstering consumer safety. Crypto issuers must publish white papers and adhere to all regulations and best practices regarding asset custody and internal controls.

Enforcement dates:

• July 1, 2021: AML regulations for cryptocurrency businesses came into effect.
• March 2023: FSC was officially designated as the primary regulatory authority for cryptocurrencies.
• September 2023: New guiding principles for crypto firms were introduced.

Taiwan Virtual Asset Service Provider Association

On June 13, 2024, 24 cryptocurrency enterprises became founding members of the Taiwan Virtual Asset Service Provider (VASP) Association. Members of this group are working toward a common goal: creating self-regulation guidelines for the digital asset market in the country. The group’s mission is to promote strict and equitable policies that will encourage the expansion of blockchain finance on a worldwide scale. Titan Cheng, creator of BitoPro, and Winston Hsiao, chief revenue officer of XREX, serve as vice chairs.

The Ministry of Justice, law enforcement, and the Taiwanese government will collaborate with the VASP Association in combating fraud along with other unlawful activities. The anticipated results include better currency movement tracking, alignment with Taiwan’s AML legislation, and the creation of a joint platform.

This association is expected to bring several improvements to the sector, namely:

• Greater cooperation,
• More efficient standardization,
• Higher transparency.

Experts say that this will help ensure healthy development and further protect consumer rights. At the same time, Taiwan is working to tighten its anti-money-laundering policies and implement new rules for digital assets. Therefore, the Association’s efforts are not only timely but also crucial. Crucial for creating a well-regulated and secure environment for the Taiwanese cryptocurrency industry.

Governmental Statements on Crypto in Taiwan

Both the FSC and the Central Bank of the Republic of China (Taiwan) have long taken a cautious approach. Bitcoin and other such digital assets are not “currency” but rather highly speculative “virtual commodities,” as they made clear in a joint statement on December 30, 2013. Subsequent declarations, such as a 2014 announcement that forbade local banks from providing Bitcoin-related services and a 2022 letter that instructed credit card acquirers not to provide services for crypto-asset transactions, further supported this stance.

The governing bodies are clearly taking a cautious stance, even in 2024. However, the fact that the FSC and the Central Bank have been vocal about their positions indicates a recognition of the growing relevance of cryptocurrencies. Now, in recent months, they have been growing even more vocal.

Developing clear regulations for the digital asset business is crucial, and the fact that such powerful organizations are tackling the issue head-on shows that Taiwan recognizes this. Although the present approach is cautious, these official remarks may indicate that Taiwan is cognizant of the need to deal with the changing financial landscape.

The different types of crypto licenses in Taiwan

As per the FSC rules, a Virtual Asset Service Provider (VASP) license is required for any firm offering services connected to virtual assets, including crypto exchanges, wallet services, and other related operations. The Commission’s “Guidelines for the Administration of Virtual Asset Service Providers" outlines this obligation.

The VASP license is meant to guarantee that companies engaged in virtual asset services follow rigorous AML, CTF, and other rules. Entities have to follow FSC policies, run strong AML systems, and regularly report on compliance. Operating lawfully inside Taiwan’s controlled crypto scene requires this license.

What is permitted with a VASP license:

• Operating a Cryptocurrency Exchange – This includes offering services to both retail and institutional clients, providing a secure and regulated environment for crypto transactions.
• Providing Wallet Services – Entities with a VASP license may provide digital wallet services, which enable customers to safely save, transmit, and receive crypto. These services have to work extra hard to satisfy FSC compliance criteria to guarantee user security.
• Compliance and Market Trust – Maintaining a VASP license greatly increases the reputation and commercial trustworthiness of a company. Following local rules draws institutional investment and more consumers.
• Membership in Self-Regulatory Organizations – Licensed VASPs may become members of the Taiwan Virtual Asset Service Provider Association. This encourages self-regulation and industry-wide adherence to the best standards possible. Membership offers more control and helps to uphold compliance requirements.
• Launching a Crypto Project – You can also launch a project that is not a wallet or a crypto exchange. It’s important to seek out individualized solutions, however.

These licenses are essential for conducting cryptocurrency operations in Taiwan in a regulated and secure manner. They protect both service providers and customers by ensuring compliance with local laws and beyond.

The Process of Setting Up a Company for a Cryptocurrency Business in Taiwan

The first major step before requesting a VASP license is establishing a company in Taiwan. The process begins with the formation of a legal entity, typically a limited company.

First, you have to register your business under the Company Act and decide on an appropriate business structure. This entails choosing a distinctive company name, preparing the articles of incorporation, and specifying the extent of your business operations, more specifically, those pertaining to crypto. In addition, you will have to name at least one director and, if necessary, set up a local office following legal requirements.

Once your business is established, you may concentrate on fulfilling the particular VASP licensing criteria. Please refer to our Company Formation in Taiwan page for further details.