Taiwan Enacts Landmark Crypto Law Covering VASPs and Stablecoin Issuance

Taiwan has taken a decisive step toward establishing a comprehensive digital asset regulatory environment. On June 30, the country's Legislative Yuan passed the Virtual Asset Service Act on its third reading, marking a significant shift in how cryptocurrency businesses and stablecoin issuers will be governed going forward.

Previously, oversight of crypto-related businesses in Taiwan was narrowly focused on anti-money-laundering (AML) compliance. The new legislation expands that scope dramatically, introducing full operational and market-conduct standards for virtual asset service providers (VASPs) and stablecoin issuers alike. The Financial Supervisory Commission (FSC) confirmed that the framework elevates regulatory expectations well beyond AML rules.

Under the Act, seven distinct VASP categories are formally recognized: virtual asset exchanges, trading platform operators, transfer service providers, custodians, underwriters, lending service providers, and a general category for other virtual asset service providers. All entities falling under these classifications must meet requirements related to customer asset segregation, internal controls, cybersecurity protocols, audit standards, and financial reporting obligations.

The legislation includes a transition arrangement for businesses that had already completed AML registration before the law takes effect, as well as financial institutions already operating under existing FSC rules. These firms will have 12 months from the Act's implementation date to apply for a formal FSC license, and up to 21 months to obtain regulatory approval and an operating license. If circumstances require it, the licensing deadline may be extended once by no more than three additional months.

On the stablecoin front, the Act introduces a dual-authorization model. Any entity wishing to issue stablecoins within Taiwan must obtain approval from the Central Bank of the Republic of China (Taiwan) and authorization from the FSC. Issuers are also required to maintain full reserve backing for all stablecoins in circulation, hold reserve assets in trust, submit to regular audits, and comply with periodic disclosure requirements.

Officials have emphasized that regulating stablecoin issuance domestically will help Taiwan align with international standards and secure a stronger position in the global digital asset market, contributing to the long-term and stable development of the country's virtual asset industry.

The law also introduces tough penalties for misconduct. Fraud or market manipulation carries prison sentences ranging from 3 to 10 years, along with fines between NT$10 million and NT$200 million — approximately $314,000 to $6.3 million USD.

The precise date on which the legislation will come into force is yet to be announced, as the Executive Yuan retains authority to determine the implementation timeline.