Taiwan Passes Virtual Asset Service Act to Strengthen Crypto Regulation

Taiwan has taken a major step toward regulating its digital asset industry after the Legislative Yuan approved the Virtual Asset Service Act on its third reading on June 30. The new law establishes a comprehensive regulatory framework for cryptocurrencies, shifting oversight beyond anti-money laundering (AML) compliance to broader operational, licensing, and market conduct requirements for virtual asset businesses.

According to the Financial Supervisory Commission (FSC), the legislation introduces a more robust supervisory system for virtual asset service providers (VASPs), bringing Taiwan closer to international regulatory standards while promoting the long-term development of its crypto market.

The law officially recognizes seven categories of VASPs, including virtual asset exchanges, trading platform operators, transfer service providers, custodians, underwriters, lending service providers, and other digital asset businesses. Companies operating under these categories will be required to obtain regulatory licenses, segregate customer assets, implement strong internal controls, maintain cybersecurity measures, conduct regular audits, and meet financial reporting obligations.

Existing VASPs that previously completed AML registration before the law takes effect, along with financial institutions already offering virtual asset services under FSC regulations, will be given a transition period. They must submit an application for an FSC license within 12 months of the law's implementation and secure final regulatory approval and an operating license within 21 months. Authorities may grant a one-time extension of up to three months if necessary.

The Virtual Asset Service Act also introduces a regulatory framework for stablecoins. Companies planning to issue stablecoins in Taiwan must receive approval from the Central Bank of the Republic of China (Taiwan) and authorization from the FSC before launching their products.

In addition, stablecoin issuers will be required to maintain full reserve backing for every token issued, place reserve assets in trust, undergo regular audits, and provide periodic public disclosures to enhance transparency and investor protection.

Taiwan's government said allowing regulated stablecoin issuance will help the country align with global crypto standards while strengthening its position in the international virtual asset market.

The legislation also imposes tougher penalties for market misconduct. Individuals convicted of fraud or price manipulation involving virtual assets could face prison sentences ranging from three to 10 years, along with fines between NT$10 million and NT$200 million (approximately $314,000 to $6.3 million).

The Executive Yuan will determine the official implementation date of the Virtual Asset Service Act. Once in force, the legislation is expected to significantly reshape Taiwan's cryptocurrency industry by introducing stricter compliance standards while providing a clearer legal framework for digital asset businesses and stablecoin issuers.