$BTC VASP Act Public Hearing: How to Coexist with "Loosening" and "Protection" of Cryptocurrency Regulation?

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The upcoming draft of the Virtual Asset Services Act will establish licensing standards for Taiwan's virtual currency providers (VASPs), the management of stablecoins, and criminal liability for fraud and manipulation. The goal is to enhance market integrity, protect the rights of traders, and establish a foundation of trust for industry development.

The Financial Supervisory Commission has adopted a phased regulation strategy and stressed that future sub-laws will further clarify stablecoin regulations, while considering using financial sandboxes to promote innovation. The central bank has suggested tiered management of cryptocurrencies based on trading volume and stressed that domestic and foreign regulation should be consistent to avoid regulatory arbitrage.

Industry representatives generally affirmed the special law framework, but also called for avoiding excessive regulation, extending the transition period, clarifying the regulations after the rejection of an application, and hoping to retain flexibility in the regulations to respond to rapid market changes. At the same time, foreign operators should not be restricted to avoid missing out on opportunities for foreign investment.

Legislators warned of the risk of cryptocurrencies becoming a tool for fraud and money laundering, called for strengthening KYC and OTP mechanisms, and suggested that supervision should be "beneficial" rather than limited to preventing money laundering, such as allowing exchanges to be listed on the OTC market, including virtual assets in mandatory property declarations, and even considering including cryptocurrencies in "sovereign reserves" and opening up Bitcoin spot ETFs to avoid the marginalization of Taiwan's digital economy.