Taiwan -- Stablecoin Regulations Regulatory Overview

Taiwan's regulatory framework for stablecoins is currently evolving and does not yet have a dedicated, comprehensive legal regime specifically for stablecoin issuance. Instead, stablecoins are primarily addressed within the broader regulatory efforts for Virtual Asset Service Providers (VASPs) and through ongoing policy discussions.

The primary regulators involved are the:

• Financial Supervisory Commission (FSC): Responsible for financial markets, banking, and securities, and has taken the lead in VASP regulation.
• Central Bank of the Republic of China (Taiwan) (CBC): Focuses on monetary policy, financial stability, and payment systems, and is researching Central Bank Digital Currency (CBDC).

Here's a breakdown of the current situation:

1. Classification of Stablecoins

Taiwan does not currently have a specific legal classification for stablecoins. They are generally considered "virtual assets" (or "crypto-assets").

• Virtual Assets (VAs): The FSC's regulatory approach treats stablecoins as a type of virtual asset. The current framework for virtual assets is primarily focused on Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) compliance for VASPs.
• E-money/Payment Tokens/Securities: The FSC is actively studying international developments (e.g., MiCA in Europe, discussions in the US) and has indicated that future legislation might categorize stablecoins based on their design and function:
  • E-money Tokens: Stablecoins pegged to fiat currency and intended for payments could be regulated similarly to e-money.
  • Payment Tokens: If used purely as a medium of exchange.
  • Securities: If a stablecoin's characteristics (e.g., profit-sharing, investment contract features) meet the definition of a security under the Securities and Exchange Act, it would be regulated by the Securities and Futures Bureau (part of the FSC). However, most fiat-backed stablecoins typically do not fall under this classification.
  • Algorithmic Stablecoins: Given past failures, these are unlikely to be classified favorably, and might face stricter scrutiny or outright prohibitions if they cannot meet stability requirements.

2. Reserve Requirements

• No specific stablecoin reserve requirements: As there is no dedicated stablecoin issuance regime, there are no prescribed statutory reserve requirements for stablecoin issuers in Taiwan.
• VASP Guidelines (Safeguarding Client Assets): However, if a VASP offers custody services for stablecoins or holds fiat assets on behalf of clients (which might include funds used to back stablecoins), the "Guidelines for Virtual Asset Service Providers" issued by the FSC mandate that VASPs must:
  • Segregate client assets from their own proprietary assets.
  • Safeguard client assets appropriately, often through trust arrangements or full deposit insurance for fiat.
• Future Outlook: Any future stablecoin legislation is expected to include robust reserve requirements, likely mirroring international standards demanding full backing (1:1) with high-quality, liquid assets, regularly audited and publicly disclosed.

3. Issuer Licensing

• No specific stablecoin issuer license: Currently, there is no distinct license required specifically for the issuance of stablecoins in Taiwan.
• VASP Registration and Compliance: Entities that provide services related to virtual assets, including stablecoins (e.g., exchange, transfer, custody), are considered Virtual Asset Service Providers (VASPs) and must:
  • Register with the FSC.
  • Comply with the "Guidelines for Virtual Asset Service Providers" (issued by the FSC).
  • Adhere to Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) regulations under the "Anti-Money Laundering and Countering the Financing of Terrorism Act."
• Future Outlook: It is highly anticipated that a future stablecoin framework would introduce specific licensing requirements for stablecoin issuers, potentially requiring them to be licensed financial institutions or obtain a specialized license.

4. Redemption Rights

• No specific statutory redemption rights for stablecoins: In the absence of a dedicated stablecoin law, there are no specific statutory provisions granting redemption rights to stablecoin holders from the issuer.
• Contractual Terms: Redemption rights would currently be governed by the terms and conditions set by the stablecoin issuer or the VASP facilitating the stablecoin.
• Future Outlook: Robust redemption rights (1:1 redemption for fiat) are a cornerstone of stablecoin regulation internationally. It is expected that future Taiwanese legislation will mandate clear and enforceable redemption rights for stablecoin holders, similar to e-money regulations.

5. Algorithmic Stablecoin Rules

• No specific rules: Taiwan does not currently have specific regulations for algorithmic stablecoins.
• Skepticism: Given the instability and failures of algorithmic stablecoins globally, it is highly probable that Taiwan would either impose very stringent requirements that would be difficult for algorithmic stablecoins to meet, or outright prohibit them as part of any future comprehensive stablecoin legislation. The focus is likely to be on fully-backed stablecoins.

6. CBDC Interaction

• CBC's CBDC Research: The Central Bank of the Republic of China (Taiwan) (CBC) has been actively researching and conducting pilot programs for a Central Bank Digital Currency (CBDC). Their efforts have explored both wholesale and retail CBDC options.
• Cautious Stance on Private Stablecoins: The CBC maintains a cautious stance on private stablecoins.
  • They recognize the potential for private stablecoins to enhance payment efficiency but also highlight risks to monetary sovereignty, financial stability, consumer protection, and AML/CFT integrity, especially if they achieve significant scale.
  • A CBCD could be seen as a safer, more stable alternative to private stablecoins, potentially reducing the need for highly regulated private stablecoins or setting a very high bar for them.
• Policy Dialogue: The CBC is part of the inter-agency discussions regarding the future regulation of virtual assets, including stablecoins, and will likely advocate for policies that prioritize financial stability and monetary policy effectiveness.

Specific Legislation and Regulatory References with URLs

1. Guidelines for Virtual Asset Service Providers (VASPs) (FSC):

   • These guidelines, issued by the FSC, outline the AML/CFT and operational requirements for VASPs operating in Taiwan. They serve as the current primary regulatory framework for entities dealing with virtual assets, including stablecoins.
   • Reference (English summary): While the official FSC announcements are usually in Mandarin, major law firms often provide English summaries. A direct link to the FSC's press releases regarding VASP regulation would be:
     • FSC News Releases (Taiwanese Government): https://www.fsc.gov.tw/ch/home.jsp?id=146&parentpath=0,2
     • You would typically look for press releases concerning "虛擬資產平台及交易業務事業 (Virtual Asset Platform and Transaction Business Operators)" or "VASP." For example, the announcement on the VASP Guidelines issued in 2023.

2. Anti-Money Laundering and Countering the Financing of Terrorism Act (AML Act):

   • This act provides the legal basis for the AML/CFT requirements that VASPs (including those handling stablecoins) must comply with.
   • Reference (English Version on Laws & Regulations Database of The Republic of China): https://law.moj.gov.tw/ENG/LawClass/LawAll.aspx?PCode=A0030089

3. Central Bank of the Republic of China (Taiwan) (CBC) CBDC Information:

   • The CBC frequently publishes research papers, reports, and press releases regarding its CBDC exploration.
   • Reference (CBC's Official Website - Research/Publications Section): https://www.cbc.gov.tw/en/mp.asp?mp=2
   • Look for publications under "Financial Research Reports" or "Speeches" for updates on CBDC progress and views on private stablecoins.

Conclusion:

Taiwan is actively working towards establishing a comprehensive regulatory framework for virtual assets, with stablecoins being a key focus. While a specific stablecoin law is still under development, the existing VASP guidelines and AML Act govern entities dealing with stablecoins. Future legislation is expected to align with international best practices, likely introducing specific licensing, robust reserve requirements, and clear redemption rights for fiat-backed stablecoins, while maintaining a cautious stance on algorithmic ones and considering the role of a potential CBDC.