In a decisive step towards integrating cryptocurrencies into the financial fabric of Taiwan, the Financial Supervisory Commission (FSC) is putting together a pilot program focused on institutional crypto custody. As part of its initiative to encourage institutional participation in the crypto market, the FSC anticipates collecting applications in early 2025. The desire for greater adoption is underscored by the interest shown by three private banks keen on joining this experiment. This paradigm shift indicates Taiwan’s regulatory commitment to embracing and facilitating the growth of digital assets within formal financial sectors.
According to reports from local news outlets, institutions wishing to participate in the pilot must clarify not only the specific types of digital currencies they hope to manage—be it Bitcoin, Ethereum, or Dogecoin—but also the intended clientele. These might include various segments such as platforms, institutional investors, high-net-worth individuals, or the broader public. This level of clarity seeks to ensure that both the participants and regulatory bodies maintain a clear understanding of the operational framework guiding this custody service.
During a recent press conference, Hu Zehua, the FSC’s Director of Comprehensive Planning, articulated the rationale behind choosing banks for this role. While some security companies expressed interest, Zehua emphasized that banks possess the financial stability and security measures indispensable for handling crypto assets. The commission has also planned a 15-day public consultation period prior to the acceptance of applications, aimed at explaining the proposed guidelines and gathering external feedback that may be used to shape final implementations.
This pilot program aligns with a broader mission of regulatory vigilance concerning the burgeoning crypto sector in Taiwan. Coinciding with this initiative, the FSC recently introduced new measures permitting professional investors to engage with foreign crypto exchange-traded funds (ETFs) through local brokerage channels. The move is strategically limited to professional investors, underlining the FSC’s cautious but positive approach towards broadening institutional investment horizons.
In conjunction, the FSC is also making strides to enhance its framework for preventing money laundering. With new Anti-Money Laundering (AML) regulations set to take effect on January 1, 2025, all virtual asset service providers (VASPs) will be mandated to register with the government by September 2025. Failure to comply could lead to severe ramifications, including imprisonment of up to two years or hefty fines that could exceed NT$5 million (approx. $155,900). This regulatory overhaul, signaled by the FSC, emphasizes the urgency for compliance, with existing entities required to undergo re-registration, even if they had previously met regulations established in July 2021.
Taiwan’s careful maneuvering in the realm of cryptocurrencies positions it as a visionary leader in the region’s financial innovation. By establishing a well-regulated framework for institutional custody and reinforcing adherence to AML regulations, the FSC is not only safeguarding against potential financial crimes but also laying a sustainable foundation for the future of digital asset investment. As the pilot scheme unfolds, it will undoubtedly serve as a case study for other jurisdictions contemplating similar regulatory approaches in the evolving world of cryptocurrencies.