A new era of crypto finance has arrived!
Driven by global trends such as cryptocurrency ETFs and stablecoin legislation, the world is entering a new era of crypto finance, which not only reshapes the global financial market but also pushes the crypto industry into a more explosive new phase. Even against the backdrop of tightening regulatory pressures in Taiwan, industry giant Taiwan Mobile still enters the market against the trend, providing cryptocurrency trading services and opening the door to digital assets for millions of users.
(WEB3+) This month, we held an offline event titled 'Gathering Points' and invited Guo Maoren, Deputy Executive Director of the Digital Asset Development Research Center, Jeff, co-founder and business director of Hayek Technology, Lesley Kuo, Sales Director of Liminal Taiwan, and Alex, founder and chairman of Jingcheng Technology, to discuss how crypto finance will impact our daily payment methods, investment choices, and asset allocation, as well as how traditional financial industries should respond and layout.
Opportunities and challenges for the development of stablecoins in Taiwan
Guo Maoren, Deputy Executive Director of the Digital Asset Development Research Center, first analyzed the global regulatory trends of stablecoins.
He pointed out that the essence of currency lies in being a medium of exchange, a standard of value, and a store of value, while the evolution of digital currency is merely a change in the medium. According to the International Monetary Fund (IMF), all currencies that can be digitized can be referred to as digital currencies.
Guo Maoren observed that many assets are still priced in US dollars, and the emergence of stablecoins provides an important medium for conversion. He specifically mentioned that the US stablecoin legislation is expected to officially launch on August 1 this year, and the proactive progress of stablecoin legislation in Singapore and Japan will have a significant impact on Taiwan.
Taking Hong Kong as an example, Guo Maoren stated that the Hong Kong Legislative Council passed the relevant draft on May 21 this year, with implementation expected on August 1, covering key points including asset management, stabilization mechanisms, redemption methods, requirements for physical institutions, and a capital threshold (25 million HKD).
He used the example of the sandbox experiment in collaboration with JD, Alibaba, Standard Chartered, and Animoca to further illustrate how Hong Kong allows selected institutions to explore the practical applications and potential of stablecoins in various financial scenarios in a safe and controlled environment, and assist regulatory agencies in paving the way for the future of crypto finance in Hong Kong.
As for Taiwan, Guo Maoren pointed out that the regulatory authority in Taiwan is very proactive in researching stablecoin legislation, having completed the regulatory announcement and will send it to the Executive Yuan and Legislative Yuan for the third reading. He mentioned that Taiwan's advantages in the development of stablecoins include a rich pool of technical talent and the potential for improved efficiency in cross-border remittances, but also faces challenges such as relatively slow regulatory progress, lack of strategic planning, and professional talent.
He emphasized that financial institutions should explore business models suitable for Taiwan and collaboratively develop stablecoin strategies through partnerships. He suggested that financial institutions leverage their advantages in compliance, cross-border services, KYC, etc., to reposition their roles in the digital asset field, viewing stablecoins as OTT services, spreading usage behavior through a flywheel effect, and learning from the telecommunications industry's 'suicide or murder' innovative inspirations to actively embrace change.
What are the new financial trends and banking layout strategies under the stablecoin legislation?
Wen Hongjun, co-founder and business director of Hayek Technology, believes that stablecoins are the infrastructure of Taiwan's financial industry, hence Taiwan must develop its own stablecoins to maintain national financial sovereignty.
He emphasized that the focus of the global stablecoin battle lies in financial centers such as New York, London, and Hong Kong, where the legislation has significant indicative meaning. Wen Hongjun cited that after the EU's MiCA legislation was passed, the non-compliant USDT was delisted in Europe, highlighting the importance of compliance licenses.
Wen Hongjun specifically pointed out that the condition for the passage of the US 'Genius Act' is that the technology industry cannot issue stablecoins, which led to a surge in Circle's stock price, as tech giants such as Meta and Amazon can only cooperate with Circle. The essence of this battle is the struggle for payment sovereignty between the tech industry and the banking industry.
Wen Hongjun also mentioned the case of South Korea, where the new president Lee Jae-myung promoted Bitcoin ETFs, pension funds purchasing Bitcoin, and the Korean won stablecoin, aiming to consolidate the country’s financial payment sovereignty. He observed that South Korean tech giants like Kakao and LG are eager to issue stablecoins, prompting the eight major banks to 'warm up' automatically, creating a competitive situation with the tech industry.
Regarding the Central Bank of Taiwan's views on stablecoins, Wen Hongjun stated that the central bank is concerned that stablecoins may impact bank deposits, thus distinguishing between 'deposit tokens' and 'payment stablecoins.' He believes the central bank is inclined to develop its own CBDC (Central Bank Digital Currency), but CBDC operates in a closed network, making it difficult to leverage the potential of blockchain and lacks anonymity, which does not meet human needs.
Wen Hongjun advocates allowing the private sector to freely compete in issuing stablecoins, which aligns with Hayek's idea of a free economy, just as Tether and Circle stand out in fierce competition.
Custody is a strategy! Unveiling the key to the security of crypto assets.
Lesley Kuo, Sales Director of Liminal Taiwan, delved into the security of crypto assets from a custodial perspective. Lesley pointed out that institutions such as family offices, crypto funds, hedge funds, and exchanges have an urgent need for secure wallets due to holding large amounts of capital. She emphasized that Liminal provides institutional-grade enterprise wallets, which are different from the exchange wallets used by general retail customers.
The differences between different types of wallets include:
Centralized wallet: Private keys are held by the exchange.
Self-custody wallet: Users hold their own private keys, further divided into cold wallets (private keys stored offline, high security, such as Ledger) and hot wallets (private keys stored in the cloud, accessible online, higher risk). Regulatory authorities usually require most assets to be stored in cold wallets.
For institutional-grade virtual asset custody, Lesley proposed six key aspects:
Asset segregation: Institutions need to have multi-level account and sub-account isolation features to ensure the separation of customer assets and their own assets.
Information security: Adopt ISO, SOC REPORT, key generation, custody, and recovery mechanisms, and regardless of MPC, Multi-sig, or HSM technology, strict auditing must be followed.
KYC/AML: KYC must be conducted on trading counterparts, and suspicious addresses and on-chain risks must be scanned.
Cold and hot wallet separation: Establish internal control systems and scheduling frequency to ensure the safe flow of assets between wallets of different temperatures.
Audit tracking: Daily asset balance reports and asset reserve proofs must be provided. Even if accounting standards are still developing, auditability must still be implemented.
Operational continuity and key recovery: Avoid single points of failure, provide key backups (such as NPC distributed key sharding), and ensure emergency recovery and restoration capabilities.
Lesley emphasized that Liminal provides completely offline cold storage for custodial services and prevents single-point risks through geographically distributed private keys (distributing private keys across different geographical locations). They also offer 24/7 uninterrupted full-service, external auditing cooperation, and require local compliance.
How to solve the transformation challenges faced by banks and the financial industry under the wave of AI technology?
Lin Junyang, founder and chairman of Jingcheng Technology, has had extensive experience collaborating with many financial institutions in Taiwan and across the Taiwan Strait, including bank account systems, credit card bill processing, and securities account opening, all of which are closely related to financial technology.
He emphasized that the essence of the financial industry is 'finding customers, getting customers to use your card, using your loans, taking care of customers, and retaining customers,' and illustrated how bank managers can quickly attract large customer deposits through informal occasions. He believes that if these deposits can be converted into stablecoins, there will be huge potential.
Lin Junyang pointed out that the development of AI benefits from the enhancement of computing power and advances in hardware technology, especially Taiwan's advantages in the semiconductor field provide fertile ground for AI development. He mentioned that AI models like GPT are now capable of 'what you can see, it can also see; what you can think, it can also think; what you can say, it can also say,' indicating that AI is becoming increasingly human-like.
However, Lin Junyang also pointed out that the biggest challenge faced by Taiwanese financial institutions is that personal data cannot be stored in the cloud, as computing power is primarily in the cloud. This makes it difficult to implement many AI applications, although complex architectures can allow computation in the cloud while keeping data on-site, but it is very complex to execute. He expects that hardware will become smaller, capacity larger, and speed faster, ultimately solving this issue.
Alex illustrates the wide application of AI in the financial industry:
Compliance SOP updates: AI can quickly analyze new regulatory documents and automatically update hundreds of SOPs, saving a lot of manpower and time.
Improved collection efficiency: AI can screen non-performing assets, avoid mistakenly selling secured assets, and automatically draft legal documents and communicate with court clerks, thus improving collection efficiency.
Customer communication and marketing: AI can provide real-time suggestions during customer service calls, conduct quality checks, and use data analysis (such as bill interactions) for more precise targeted marketing, promoting products and services.
Lin Junyang believes that in the future, AI will connect all industries, and stablecoins represent a huge direction for development. He suggested that stablecoins can coexist with Taiwan's traditional financial industry in the initial stage, but humorously stated that if one day 'Trump suddenly says to pay for semiconductors with stablecoins,' then the regulatory process might 'speed up a bit.'
He also mentioned the potential of combining stablecoins with insurance, such as monitoring brushing habits through AIoT toothbrushes, where those performing well can receive premium discounts or stablecoin rewards, and applications like using AI cameras to detect skin cancer. These all show that the combination of AI and blockchain technology can bring more innovation and inclusiveness to financial services.
