Title: Taiwanese Legislators Introduce Virtual Asset Management Bill to Strengthen Consumer Protection and Oversight
On October 25, Taiwanese legislators presented the Virtual Asset Management Bill to the single-chamber parliament, the Legislative Yuan. This legislation aims to enhance consumer protection and establish better oversight within the rapidly growing digital asset sector.
Enhanced Obligations for Virtual Asset Service Providers:
The 30-page document outlines various practical obligations for Virtual Asset Service Providers (VASPs). Important mandates include segregating client funds from operational reserves, implementing internal audit and control systems, and joining local trade associations relevant to digital assets. Notably, the bill does not impose a 1:1 reserve requirement for stablecoin issuers and does not address algorithmic stablecoins.
Penalties for Unlicensed Operations:
The legislation also defines penalties for unlicensed VASPs, including fines ranging from 2 million to 20 million Taiwanese dollars (approximately $60,000 to $600,000). Existing market participants have been given a six-month grace period after the bill’s enactment to obtain the necessary licenses.
Aligning with Recent Guidelines and Self-Regulation:
This legislative effort aligns with the September 2023 guidelines set by the Financial Supervisory Commission (FSC) of Taiwan, which prohibited foreign VASPs from operating within Taiwanese jurisdiction without necessary approvals. In addition, major crypto exchanges in Taiwan formed a self-regulatory body, the Taiwan Virtual Asset Platform and Transaction Business Association, on September 26. The association aims to promote collaboration between the crypto industry and regulatory bodies.
Contrasting Regulatory Approaches in Asia:
Compared to the stricter regulatory frameworks seen in neighboring Hong Kong and Japan, Taiwan’s proposal appears more lenient. While Hong Kong emphasizes strict regulations on derivatives and stablecoins, and Japan requires accredited exchanges to employ custodians, the Taiwanese bill primarily focuses on separating client and company funds.
Towards a Nuanced Regulatory Framework:
The bill includes a provision for periodic reporting by exchange operators, though it does not specifically mention Proof of Reserves. It allows the regulatory body to devise asset ratio rules after consulting industry stakeholders. This approach reflects a cautious stride towards establishing a regulatory framework following the collapse of the FTX exchange in November of the previous year, which had gained a significant user base in Taiwan due to favorable interest rates on US dollars compared to local banking offerings.
Positive Industry Outlook:
Initial feedback from the crypto sector in Taiwan indicates optimism regarding the introduction of formal regulatory supervision. The industry views it as a valuable step towards legitimizing the digital asset sector.
The Virtual Asset Management Bill proposed by Taiwanese legislators seeks to enhance consumer protection and oversight in the digital asset sector. Its moderate approach, aligning with recent guidelines and self-regulation efforts, sets the stage for a refined regulatory framework while addressing the unique needs of the market.
### News source: blockchain.news