FSC — VASP guidelines and oversight — dedicated law under legislative review

**Regulator/Enforcement Body:** Taipei District Prosecutors Office, New Taipei District Prosecutors Office, Criminal Investigation Bureau (CIB).

**Entity Targeted:** David Pan (潘奕hofer), founder of ACE Exchange, and approximately 10 other individuals.

**Penalty Amount:** Assets worth over NT$200 million (approximately US$6.4 million) were frozen, including real estate, luxury cars, and cryptocurrency. The investigation is ongoing, and final penalties (imprisonment, further asset forfeiture) will be determined by the courts.

**Date:** January 8, 2024 (arrests and initial actions).

**Outcome:** Key individuals, including the founder of a prominent Taiwanese exchange, were arrested. Assets were frozen, and legal proceedings are underway. This was a major blow to investor confidence and highlighted the risks within the unregulated parts of the crypto market.

Taiwan News: ACE Exchange founder among those arrested in fraud probe

Taipei Times: ACE Exchange founder arrested for fraud

CNA: ACE Exchange founder, others held in fraud probe

**Regulator/Enforcement Body:** Various local police departments (e.g., Tainan City Police Department, Kaohsiung City Police Department), District Prosecutors Offices.

**Entity Targeted:** Numerous individuals and groups promoting "Pi Network" as a guaranteed high-return investment or operating multi-level marketing (MLM) schemes based on its unlisted cryptocurrency.

**Violation Type:** Fraud, operating illegal pyramid schemes (violation of the Multi-level Marketing Supervision Act), misleading advertising.

**Penalty Amount:** Varies per case, but includes arrests, asset seizures (though often smaller sums of cash, not directly crypto), and fines/imprisonment upon conviction. Specific aggregate amounts for *all* Pi Network-related crackdowns are hard to tally as they are localized efforts.

**Date:** Ongoing from late 2022 through 2023 (various arrests and warnings were issued during this period).

**Outcome:** Numerous arrests across Taiwan, public warnings issued by authorities regarding the risks of Pi Network and similar speculative "investments," helping to protect potential victims.

CNA: Police crack down on illegal pyramid scheme using 'Pi Coin' (Example of a specific crackdown, illustrating ongoing issue)

Taiwan News: Taiwan police raid Pi Coin pyramid scheme (Another example, showing ongoing nature)

Taipei Times: Tainan police arrest nine over alleged Pi Coin pyramid scheme

**Regulator/Enforcement Body:** Criminal Investigation Bureau (CIB), Taipei District Prosecutors Office.

**Entity Targeted:** Individuals involved in online romance scams and investment fraud predominantly using Telegram, convincing victims to invest in fake cryptocurrency platforms.

**Violation Type:** Fraud, money laundering.

**Penalty Amount:** Arrests, freezing of bank accounts, and seizure of assets (e.g., millions of NTD in illicit gains). Specific fines and prison sentences are determined post-conviction. One operation in 2023 alone saw NT$110 million (US$3.5 million) in illicit gains seized.

**Date:** Ongoing throughout 2022 and 2023 (multiple distinct operations against such groups).

**Outcome:** Multiple arrests, significant amounts of illicit funds frozen or seized, raising public awareness about online investment scams.

Taiwan News: Taiwan police nab 17 for Telegram-based crypto investment fraud (July 2023 example)

CIB Press Release (Chinese): Search for "刑事警察局 假投資 真詐財" often yields multiple press releases on such cases. Example release (though this one might be outside the 3-year window for *specific* enforcement details, it shows the *type* of ongoing enforcement). Finding English specific press releases on individual operations can be challenging, but news articles frequently cover them.

**Exchange** between virtual assets and fiat currencies.

**Exchange** between one or more forms of virtual assets.

**Custody and/or administration** of virtual assets or instruments enabling control over virtual assets.

Participation in and provision of financial services related to an issuer’s **offer and/or sale of a virtual asset**.

**Exchanges (Virtual Asset Trading Platforms):** Absolutely fall under the VASP definition and are required to register with the FSC for AML compliance.

**Custody Providers (Wallet Services):** Explicitly covered under point 4 of the VASP definition and must register.

**Payment Processors:** If the payment processing involves:

Exchanging fiat to crypto or crypto to fiat.

Transferring virtual assets on behalf of customers.

Facilitating payments using virtual assets where they have control over the assets.

A VASP must establish a **legal entity registered in Taiwan** (e.g., a company limited by shares).

This entity will be responsible for AML/CFT compliance.

**AML/KYC/CFT Measures:** This is the core of the regulations. VASPs must implement robust programs, including:

**Customer Due Diligence (CDD):** Identifying and verifying customer identity (KYC - Know Your Customer), beneficial ownership, and the purpose and intended nature of the business relationship.

**Enhanced Due Diligence (EDD):** For higher-risk customers or transactions.

**Ongoing Monitoring:** Monitoring business relationships and transactions to ensure consistency with the VASP's knowledge of the customer.

**Suspicious Transaction Reporting (STR):** Reporting suspicious activities to the Financial Intelligence Unit (FIU) under the Ministry of Justice Investigation Bureau (MJIB).

**Record-Keeping:** Maintaining records of customer identification data, transaction data, and STRs for at least five years.

**Risk Assessment:** Conducting comprehensive risk assessments for money laundering and terrorist financing.

The current VASP AML regulations **do not specify a dedicated minimum capital requirement** specifically for AML compliance.

However, the VASP must be established as a legal entity in Taiwan, and thus must meet the general minimum capital requirements for company registration under Taiwanese company law (e.g., for a company limited by shares, the minimum capital is NTD 500,000, though a serious VASP would require significantly more operational capital).

It is widely expected that a future Virtual Asset Management Act will introduce specific, higher capital requirements for licensed VASPs, similar to financial institutions.

Establishing an **independent compliance unit** responsible for AML/CFT matters.

Appointing a **Chief Compliance Officer (CCO)** at the management level, who must be properly qualified and have sufficient resources.

Developing and maintaining comprehensive **internal control policies and procedures** for AML/CFT.

Providing **regular training** for employees on AML/CFT.

Implementing **internal audit mechanisms** to review AML/CFT compliance.

**Technology & Security:** While not explicitly detailed as a separate item, secure systems for customer data, transaction records, and overall operational integrity are implicitly required for effective AML/CFT implementation.

**Establish a Local Entity:** Register a legal entity (e.g., a company limited by shares) in Taiwan.

**Develop AML/CFT Programs:** Draft comprehensive internal control policies and procedures for AML/CFT, including KYC, transaction monitoring, risk assessment, and reporting mechanisms.

**Appoint Key Personnel:** Appoint a Chief Compliance Officer (CCO) and establish a compliance unit.

**Prepare Documentation:** Compile all required documents, which typically include:

Information on the CCO and key management.

Details of the VASP's business model and services.

**Submission to FSC:** Submit the complete application package to the Financial Supervisory Commission (FSC).

**FSC Review:** The FSC will review the submitted documents for compliance with the VASP AML Regulations. They may request additional information or clarifications.

**Registration Confirmation:** Upon successful review, the FSC will confirm the VASP's registration for AML compliance.

**Money Laundering Control Act (MLCA):** This foundational act provides the legal basis for AML/CFT in Taiwan, under which VASPs are designated as reporting entities.

**Taiwan Law and Regulation Database (English Translation):** https://law.moj.gov.tw/Eng/LawClass/LawAll.aspx?PCode=A0030103

**Regulations Governing Anti-Money Laundering and Countering the Financing of Terrorism for Virtual Asset Service Providers (虛擬資產平台及交易業務事業防制洗錢及打擊資恐辦法):**

**Taiwan Law and Regulation Database (Chinese version, often with an English translation linked if available):** https://law.moj.gov.tw/LawClass/LawContent.aspx?PCODE=G0380252

*Note: Direct official English translations might not always be immediately available on the same page, but the Chinese version is the authoritative one. Reputable legal firms often provide unofficial English translations or summaries.*

**FSC's Official Website (English Portal):** While not a specific regulation, the FSC's website provides general information and updates on their regulatory stance.

https://www.fsc.gov.tw/ (Navigate to English > Laws and Regulations > Financial Institution Management)

**Monetary Contribution:** An investment of money or assets by the investor.

**Common Enterprise:** The investment is made into a common enterprise or a collective project.

**Expectation of Profit:** The investor has a reasonable expectation of profits or returns from the investment.

**Third-Party Effort:** The profits are derived primarily from the efforts of a promoter or a third party, rather than solely from the efforts of the investor.

**Security Tokens (STOs):** These are specifically designed to represent traditional securities (like equity, bonds, or interests in collective investment schemes) on a blockchain. If they meet the four criteria above, they are unequivocally classified as securities and fall under the FSC's STO regulations.

**Stablecoins:** Currently, stablecoins are generally *not* treated as securities in Taiwan. The FSC is developing a separate regulatory framework for stablecoins, likely treating them more as payment instruments or e-money, potentially under the Banking Act or a dedicated regulatory regime. However, specific stablecoins that offer interest or are structured like an investment product could potentially be reviewed for security characteristics.

**Non-Fungible Tokens (NFTs):** Most NFTs (digital collectibles, art) are *not* considered securities. They are generally treated as digital assets or collectibles. However, fractionalized NFTs or NFTs that are bundled with profit-sharing mechanisms, royalty streams, or represent an interest in a collective investment scheme could potentially be reclassified as securities.

**General Rule:** STOs that are considered securities are subject to the registration and disclosure requirements of the **Securities and Exchange Act**. This typically entails filing a prospectus, providing audited financial statements, and undergoing a review process similar to traditional public offerings.

**Small-Scale STO Exemption:** The FSC has provided a significant exemption for smaller STOs to foster innovation while maintaining investor protection. An STO can be exempt from the full public offering requirements if it meets specific conditions:

**Total Offering Amount:** The total offering amount does not exceed **NTD 30 million** (approximately USD 1 million, subject to exchange rate fluctuations).

**Number of Investors:** The offering is limited to **professional investors**, with a maximum of **30 professional investors**.

**Platform Requirement:** The STO must be issued and distributed through an FSC-licensed **securities firm** operating an STO platform.

**Filing Requirement:** Even with this exemption, the issuer must still prepare an "offering plan" and file it with the FSC through the licensed securities firm for review. This is not a complete exemption from regulatory oversight.

**Larger STOs:** Any STO exceeding the NTD 30 million threshold or targeting more than 30 professional investors (or general investors) would be subject to the full, stringent requirements for public offerings under the SEA, making them practically very difficult to conduct in Taiwan under the current framework.

Secondary trading of STOs is **only permitted on FSC-licensed "security token trading platforms."** These platforms must be operated by a securities firm licensed by the FSC to engage in such activities.

Trading is generally **restricted to "professional investors"**.

The platforms must adhere to strict rules regarding investor protection, anti-money laundering (AML), custody, trading rules, and technology security.

Custody of the STOs must be handled by an institution approved by the FSC.

**Non-Security Tokens (e.g., Bitcoin, Ethereum, most Utility Tokens):**

Trading platforms for non-security cryptocurrencies are *not* regulated under the Securities and Exchange Act by the FSC for licensing.

However, they are subject to **Anti-Money Laundering (AML)** and Countering the Financing of Terrorism (CFT) regulations. Virtual Asset Service Providers (VASPs) in Taiwan must comply with the **"Regulations Governing Anti-Money Laundering and Countering the Financing of Terrorism for Virtual Asset Service Providers"** and register with the FSC for AML compliance purposes.

The FSC is also working on a dedicated VASP licensing framework to further regulate these platforms beyond just AML, which is expected to introduce broader prudential and market conduct requirements.

**Anti-Money Laundering (AML) Compliance:** The most active area of enforcement has been ensuring that Virtual Asset Service Providers (VASPs) comply with AML/CFT regulations. The FSC frequently issues warnings and requires VASPs to register and implement robust AML procedures. Failure to comply can result in fines and directives to improve systems.

**Example:** In recent years, the FSC has required all virtual asset platforms to complete their AML declarations and has conducted checks to ensure compliance with identity verification (KYC), transaction monitoring, and suspicious activity reporting. Platforms found non-compliant could face administrative penalties.

**Unregistered Securities Offerings:** While specific, high-profile *crypto-native* unregistered STO cases leading to criminal prosecution might not be widely publicized, the FSC has issued strong warnings against token offerings that possess securities characteristics but have not gone through the proper registration or exemption process. Any entity conducting an STO that exceeds the small-scale exemption without proper FSC registration would be in clear violation of the Securities and Exchange Act, which carries significant legal penalties, including fines and imprisonment for responsible persons, similar to unregistered traditional securities offerings.

**Fraud and Investment Scams:** The police and other law enforcement agencies frequently investigate and prosecute individuals and groups involved in crypto-related investment scams that promise unrealistic returns, often involving Ponzi schemes or misleading marketing. While these are often prosecuted under general fraud statutes, the FSC would also step in if the tokens involved were found to be unregistered securities.

**Securities and Exchange Act (證券交易法):**

*Note: This is the foundational law for securities in Taiwan, defining what constitutes a security and outlining regulatory requirements.*

**Regulations Governing Security Token Offerings by Securities Firms (證券商經營證券型代幣業務管理辦法):**

*Note: This is the primary regulation detailing the framework for STOs, including the small-scale exemption and platform requirements.*

*Note: This governs AML/CFT compliance for all Virtual Asset Service Providers (VASPs) in Taiwan, regardless of whether the tokens are securities.*

**Financial Supervisory Commission (FSC) Website (English Section):**

*Note: The FSC website is the official source for press releases, policy updates, and further guidance related to cryptocurrency and financial regulations in Taiwan.*