Taiwan Passes Virtual Asset Service Act, Setting Rules for Stablecoins and Exchanges

Taiwan moved to eliminate legal uncertainty in the digital-asset market after lawmakers passed legislation establishing a regulatory framework for the broader cryptocurrency industry.

The Block reported on July 1 that Taiwan’s Legislative Yuan passed the Virtual Asset Service Act in its third reading and sent it to President Lai Ching-te. Lai is set to promulgate the law within 10 days, while the Executive Yuan will separately decide when it takes effect.

Under the law, virtual-asset service providers must obtain prior approval from the Financial Supervisory Commission before beginning operations. The measure also strengthens requirements on cybersecurity, segregation of customer assets and internal controls. Companies seeking to issue or manage stablecoins must win approval from both the FSC and the central bank, and they will be required to maintain full reserves.

Businesses that have already completed anti-money laundering registration will be granted a grace period. They must apply for a license within 12 months after the law takes effect and obtain FSC approval and related permits within 21 months.

The law also sets criminal penalties for violations. Operating unlicensed virtual-asset services or issuing stablecoins without approval is punishable by up to seven years in prison and a fine of as much as NT$100 million, or about $3.14 million. Fraud or market manipulation carries prison terms of three to 10 years, along with fines ranging from NT$10 million, or about $314,000, to NT$200 million, or about $6.28 million.

Kevin Cheng, chief executive officer of crypto consulting firm Harmony Governance Advisors, told The Block that virtual-asset companies that had operated in a legal gray area will no longer be able to rely on regulatory ambiguity. Traditional financial institutions will also be able to operate virtual-asset service providers in the future, leaving existing crypto firms to compete with new entrants that have much stronger financial compliance capabilities.

Titan Cheng, chairman of the Taiwan VASP Association and founder of virtual-asset exchange BitoGroup, said the group will work with regulators on implementation rules covering license issuance, personnel management, operations and internal controls. It will also help companies adapt during the transition period while minimizing market disruption.