With two separate drafts of the Virtual Asset Service Act in motion, Taiwan aims to bring clarity and investor protection to its fast-growing crypto industry.
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Taiwan Pushes for Unified Crypto Regulation Through Licensing Laws
In a major step toward establishing comprehensive crypto oversight, Taiwan is preparing to mandate licensing for all firms dealing in digital assets. The country’s Financial Supervisory Commission (FSC) and legislator Huang Shan-shan have released two competing drafts of the Virtual Asset Service Act, both aiming to address the legal gray areas currently surrounding Taiwan’s digital asset ecosystem.
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While Taiwan already requires anti-money laundering (AML) compliance for crypto firms, it still lacks dedicated legislation for how these businesses are licensed, operated, and held accountable. The introduction of a unified legal framework seeks to resolve this regulatory gap.
Dual Crypto Bills Seek to Curb Unregulated Activity and Investor Risk
The FSC released its version of the Virtual Asset Service Act last week, with lawmaker Huang Shan-shan unveiling a separate draft soon after. Both aim to introduce clearer standards for crypto trading activities, licensing obligations, and investor protections in Taiwan’s rapidly expanding virtual asset space.
Currently, in the absence of crypto-specific legislation, digital asset businesses are navigating legal uncertainty—particularly around what constitutes lawful trading practices. The new bills aim to establish enforceable boundaries while providing stronger recourse for investors affected by exchange closures or failed blockchain projects.
Proposed Penalties Target Unregistered or Non-Compliant Crypto Firms
Under both proposed versions of the act, crypto companies that fail to register or comply with AML requirements could face fines up to NT$5 million (approximately $150,400) or prison sentences of up to two years for executives or responsible parties.
The proposed legislation is intended to raise operational standards and ensure Taiwan’s crypto firms deliver secure and transparent services. If passed, the law would mark one of the most comprehensive efforts in Asia to integrate crypto regulation into a national financial system.
Stricter Requirements Could Squeeze Out Smaller Crypto Startups
While proponents of the bill emphasize investor safety and fraud prevention, some industry experts are voicing concern about the potential impact on smaller players.
Kevin Cheng, a crypto-focused lawyer and Secretary General of the Taiwan Fintech Association, acknowledged that stricter licensing would likely improve overall service quality. However, he warned that smaller fintech startups—particularly those with capital between NT$300 million and NT$500 million—may struggle to remain competitive under the proposed framework.
Experts Urge Tiered Regulation to Support Fintech Innovation
In response to these concerns, fintech attorney Eddie Hsiung has recommended a tiered regulatory model that adjusts licensing requirements based on company size and operational scope. He argues that while larger firms should be held to rigorous standards, smaller startups should benefit from lighter compliance obligations to encourage innovation and market entry.
This approach, according to Hsiung, would preserve Taiwan’s competitiveness in the global crypto and Web3 ecosystem without compromising on essential safeguards.
Striking a Balance Between Oversight and Innovation
Despite calls for flexibility, proponents of the bill maintain that robust regulation is essential to prevent scams and exchange collapses—some of which have already impacted Taiwanese investors in recent years.
Both versions of the Virtual Asset Service Act are expected to undergo further review. Policymakers and the FSC are now tasked with balancing financial innovation with consumer protection, while also ensuring that any new framework fosters sustainable industry growth.
By listening to feedback from stakeholders and the fintech community, Taiwan has the opportunity to become a regional leader in responsible crypto regulation, while enabling the growth of both large platforms and emerging blockchain ventures.
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