Today (12th), FSC Chairman Huang Tien-mu went to the Legislative Yuan to deliver a special report on the "Progress of Formulating the Special Law for Virtual Assets" and answered questions. He pointed out that the rapid development of virtual assets and their trading activities (VASP) has made them susceptible to fraudulent activities due to their anonymous, cross-border, and difficult-to-trace nature. Therefore, countries have begun to strengthen regulations to prevent VASP from becoming tools for illegal activities.
Huang Tien-mu stated that the FSC has been designated by the Executive Yuan as the competent authority for virtual assets with financial investment or payment attributes, based on anti-money laundering principles. They are adopting a progressive strategy to strengthen industry management and consumer protection gradually.
He also mentioned that the virtual asset industry is emerging, and there is international consensus that it will need to be a licensed industry in the future. Initially, it will be regulated under a registration system, and after the special law is formulated, the FSC will also serve as the competent authority for the "investment and trading" aspects of virtual assets.
Four Phases of FSC's Regulation of VASP
Regarding the management of VASP-related matters, the FSC will adopt a gradual approach in four phases:
- Publish the "Regulations on Anti-Money Laundering and Counter-Terrorism Financing for Virtual Currency Platforms and Trading Businesses" to begin regulating VASP. This includes completing anti-money laundering and counter-terrorism operations inspections for three VASP in 2022, conducting special inspections on four businesses last year, and including these businesses in the annual inspection targets starting this year to ensure compliance.
- Actively promote the establishment of a VASP industry association and the formulation of self-regulatory standards. Last September, the FSC set the VASP Guidelines. The VASP Association is expected to hold its inaugural meeting on June 13 this year. The FSC will actively supervise the association to establish self-regulatory standards based on the VASP Guidelines, including penalties to strengthen self-regulation, and will enhance cooperation with the association to promote the healthy development of the industry.
- Amend the Anti-Money Laundering Act to include a VASP registration system, clearly define VASP, and impose criminal liabilities on illegal businesses to strengthen management. Differentiated management will also be considered in subsidiary laws.
- Promote the legislation of the Special Law for Virtual Asset Management to effectively regulate market behavior while promoting the healthy development of financial technology and the VASP industry.
Ultimate Goal: Establish a Special Law
Huang Tien-mu noted that the FSC commissioned an external research team in January this year to study the special law for VASP management.
The study will collect and analyze regulations or recommendations from the EU, Japan, South Korea, Hong Kong, the UK, the Financial Action Task Force (FATF), and the International Organization of Securities Commissions (IOSCO). It will focus on regulatory key points necessary for drafting the special law for virtual assets, such as licensing conditions, consumer protection, capital requirements, asset custody, market trading behavior regulations, and business development.
Huang Tien-mu revealed that the research team is expected to provide a draft of the final report by the end of September this year. The FSC plans to draft the provisions of the Special Law for Virtual Asset Management by the end of December this year, conduct regulatory announcements, and hold public hearings. Adjustments will be made based on public opinions, and the draft law is expected to be submitted to the Executive Yuan by June 2025.
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