Taiwanese authorities are taking decisive action against unlicensed and fraudulent activities in the realm of cryptocurrencies. A draft of the Virtual Asset Service Act (VASA), which includes stringent penalties, has been approved by the Executive Yuan, marking a pivotal development in the regulation of digital assets across the island.
On April 2, local news sources reported the passing of the VASA draft, a significant update aimed not only at regulating stablecoins but also at integrating a robust framework for Virtual Asset Service Providers (VASPs). This initiative comes from the Financial Supervisory Commission (FSC), which has been working diligently to put in place a comprehensive legal architecture for the crypto sector.
The 2024 overhaul of Taiwan’s Anti-Money Laundering (AML) strategy has already set a precedent by including crypto firms under its guidelines. With a deadline of September 2025 for compliance, this new legislation emphasizes the importance of AML registration for digital asset companies.
Premier Cho Jung-tai elaborated on the VASA framework, which will roll out in four phases, focusing on self-regulation within the industry and compliance with AML regulations. He noted that these measures are designed to bolster transaction security while nurturing financial innovation in Taiwan’s burgeoning digital asset economy.
The VASA draft stipulates that companies engaging in virtual assets must establish operational frameworks that adhere to specific standards regarding their organizational structures, names, and capital requirements. Additionally, financial institutions wishing to provide VASP services must gain appropriate approvals.
Furthermore, tailored regulations will apply based on the nature of the service provider. For example, trading platforms will be mandated to implement transparent listing and delisting policies for virtual assets.
The penalties outlined in the draft are particularly severe. Those found guilty of engaging in practices such as crypto falsification, concealment, or price manipulation could face prison sentences ranging from three to ten years, alongside fines reaching NTD 200 million (approximately $6.25 million). Entities issuing stablecoins without proper licensing could see even harsher repercussions, facing up to seven years in prison and fines of up to NTD 100 million (about $3.13 million).
The new stablecoin regulations introduced under VASA exhibit a clear shift towards stricter governance. Officials have emphasized that issuance and redemption must occur at face value, prohibiting issuers from refusing redemption requests. Additionally, issuers cannot offer interest on the stablecoins they create, adhering to global trends in stablecoin regulation.
Moreover, issuers are required to implement robust internal control and audit systems alongside information security measures to facilitate reliable operations regarding stablecoin issuance and redemption.
FSC Deputy Chairman Chen Yen-liang has clarified that, while stablecoin issuance is not relegated to banks alone, financial institutions generally possess the capital strength and risk management capabilities to more effectively comply with regulatory requirements.
As the landscape evolves, diverse capital thresholds and operational guarantees will be established for various operators based on the specificities of their businesses. These details will be announced following the official enactment of the legislation.
In a forward-looking statement, FSC Chairman Peng Jin-long has indicated that Taiwan could see its first regulated stablecoin by the latter half of 2026. This is anticipated to follow the approval of the VASA, with development of stablecoin-centered regulations set to proceed within six months post-approval.
The introduction of these regulations marks a significant step toward establishing a safer, regulated space for crypto activities in Taiwan. By prioritizing compliance and security, Taiwan is positioning itself as a responsible player in the global crypto landscape.
