Taiwan has made a giant leap in cleaning up the digital asset sector. The country’s parliaments in the final reading voted to approve the Virtual Asset Service Act. This is a significant step in legislation leading towards a designated and safe area of the regulatory landscape for the local crypto market.

The new legislation now goes to President Lai Ching-te for his signature. Experts believe the president is expected to sign the bill within 10 days while the cabinet will soon announce the date the rules enter into use.

Major Changes Coming for Crypto Companies

The new system introduces significantly more robust scrutiny for virtual asset service providers, virtual asset trading platforms and stablecoin issuers. The Financial Supervisory Commission (FSC) will be responsible for the supervision process.

Anyone providing services is required to have formal approval from the FSC.

• Mandatory Licensing: Companies must secure formal regulatory approval from the FSC before offering services.
• Closely segregated Assets: To keep users money safe, exchanges have to separate the company money from assets.
• Enhanced Security: Firms must upgrade their internal controls and cybersecurity setups to prevent hacks.
• Tough Regulation for Stablecoins: Stablecoin issuers should ensure absolute reserve backing for their tokens. They also require joint approval from the FSC and central bank.

Currently, businesses are only subjected to simple anti-money laundering requirements. Under the new law, already established platforms will have 12 months to apply for a licence after it comes into force. Within 21 months they should acquire full FSC approval to continue operating.

Harsh Fines and Jail Time for Violators

Compliance is not something that is taken lightly in Taiwan. The law does impose heavy crimes against sites that fail to follow the regulations.

Seven years imprisonment are possible for running a crypto business without registration or releasing illegal stable coins. Violators will be fined up to NT$100 million or about $3.14 million.

Further, penalties for market manipulation and fraud include three to 10 years in prison. Fines for these financial crimes can reach up to NT$200 million, or about $6.28 million.

The move comes in the wake of indications that Taiwan could introduce a national stablecoin by 2026. These new tough rules give the clear guidelines necessary for the market to increase safely.