Taiwan Proposes Digital Asset Bill To Regulate Crypto Activities
A Landmark Crypto Bill
Taiwan has taken a significant step toward regulating digital assets by introducing a crypto bill for the Legislative Yuan’s first reading. The purpose of the proposed Virtual Asset Management Ordinance Draft guidelines is to define virtual assets precisely, provide asset operators with operational procedures, guarantee customer safety, and require membership in trade bodies to obtain regulatory approvals.
Taiwan’s approach to the digital asset market was largely laid back until recently, with the industry being governed only by the country’s anti-money laundering and know-your-customer (KYC) laws. The recent regulatory step was accelerated by the sudden shutdown of the cryptocurrency exchange FTX in November 2022.
There were claims that the platform offered more favorable US dollar interest rates than local banks; thus, it became trendy among Taiwanese users. This move represents a significant change in Taiwan’s digital currency market strategy, indicating a more proactive approach to monitoring and defending the interests of operators and investors in this rapidly developing industry.
The proposed legislation aims to provide a safe, open, and transparent environment for all parties participating in the ecosystem of digital assets while also encouraging innovation.
Enabling A Balanced Approach To Regulation
Taiwan’s proposed crypto bill contrasts with the laws of its closest neighbor, Hong Kong, as it adopts a more accommodating approach to derivatives and stablecoins. The new regulation acknowledges that products associated with virtual assets, particularly perpetual contracts, have unique qualities that might not fully conform to conventional financial laws.
This gives room for future drafts to include regulations unique to crypto derivatives. Nevertheless, the inclusivity of the bill is one of its notable features.
For instance, it does not restrict the trading of virtual assets to professional investors only, as some jurisdictions do. Thus, this strategy aims to promote a more open and varied cryptocurrency market.
The bill also differs from Japan’s strict regulations regarding the use of custodians in exchanges with local licenses. Instead, it requires that business funds and customer assets be kept apart without explicitly requesting that third-party custodians be involved.
Taiwan’s proposed crypto law recognizes the unique features of virtual assets and their derivatives and takes a balanced approach to regulation. As a result, this well-rounded viewpoint denotes an attempt to develop a regulatory framework that promotes innovation while defending investors’ interests and the ecosystem’s integrity for digital assets.
Observers believe that the bill will significantly shape Taiwan’s place in the global digital economy.
Achieving Transparency
The recently proposed crypto bill in Taiwan requires exchange operators to hire accountants regularly to create reports about their business and the assets they manage. Furthermore, they must allow regulatory agencies like the Financial Supervisory Commission (FSC) access to frequently examine their internal control and audit systems.
While there is no mention of Proof of Reserves specifically in this first draft, it does state that the regulator will work with industry experts to develop asset ratio standards. Meanwhile, top players in the Taiwan crypto industry have expressed their support for this formal regulatory oversight.
According to Wayne Huang, co-founder and CEO of Taipei-based fintech company XREX, the next step should involve close dialogue between players in the nation’s virtual asset service provider industry and the regulators.
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