Taiwan bans unregistered foreign crypto exchanges from operating, implements stricter regulations.

Taiwan bans unregistered foreign crypto exchanges from operating, implements stricter regulations.

Taiwan Implements New Guidelines for Cryptocurrency Exchanges

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Cryptocurrency regulation continues to evolve globally as countries seek to protect users and promote transparency within the industry. On September 26th, Taiwan’s financial regulator, the Financial Supervisory Commission (FSC), introduced new guidelines for Virtual Asset Service Providers (VASPs), aiming to enhance user protection and strengthen internal controls within cryptocurrency firms.

Ensuring Transparency, Asset Protection, and Information Disclosure

The FSC has been actively working to regulate the cryptocurrency exchange sector to safeguard users within the country. In July 2021, it made it mandatory for VASPs to comply with anti-money laundering (AML) rules and regulations. Now, the newly released guidelines specify additional requirements for cryptocurrency exchanges operating under its jurisdiction.

One of the key focuses of the guidelines is ensuring the separation and protection of company treasury assets from customer assets. This measure seeks to prevent commingling of funds and enhance asset security. Furthermore, the guidelines establish a new review standard for the listing and delisting of digital assets, promoting better practices in asset evaluation and selection.

In addition to asset protection measures, the guidelines also emphasize the importance of information disclosure. Cryptocurrency firms under the FSC’s jurisdiction are required to provide clear and comprehensive information to users, ensuring transparency and reducing the risk of fraudulent activities.

Collaborative Self-Regulation in Taiwan’s Crypto Industry

Recognizing the potential benefits of self-regulation, the FSC extended invitations to VASPs to collaborate in the development of self-regulatory standards. Major cryptocurrency exchanges in Taiwan have already responded to this call by jointly establishing a self-regulatory association.

A working group comprised of nine Taiwan-based cryptocurrency exchanges is actively working on defining self-regulatory norms aligned with the FSC’s guidelines. This collaborative effort includes prominent exchanges such as Maicoin, BitstreetX, Hoya Bit, Bitgin, Rybit, Xrex, Shangbito, and others. Together, they are forming the Virtual Asset Platform and Transaction Business Association, aiming to finalize and submit these norms by mid-October.

Wayne Huang, co-founder and Group CEO of Taipei-based crypto exchange XREX, expressed optimism about the FSC’s guidelines, highlighting the potential positive impact on the industry. He stated, “The FSC’s new guidelines could give birth to a new industry, providing this new industry legitimacy, oversight, a solid path to grow, and an accelerated means to acquire public trust.”

Drawing Inspiration from Global Regulatory Frameworks

Taiwan’s FSC has taken inspiration from established regulatory frameworks in countries such as the European Union, Japan, and South Korea. These frameworks have proven effective in promoting responsible cryptocurrency trading and protecting user interests. By adopting similar principles, Taiwan aims to impose restrictions on unregistered cryptocurrency exchanges and ensure compliance with AML regulations.

This move follows Taiwan’s decision to designate the FSC as the primary regulator of cryptocurrencies in the country starting in 2023. The global cryptocurrency market has faced increased regulatory scrutiny following the 2022 market crash and the revelation that customer funds may have been commingled with company assets at FTX, a now-bankrupt crypto exchange.

To comply with the new regulations, foreign cryptocurrency firms seeking to operate in Taiwan or serve Taiwanese customers must register with the regulator and demonstrate their adherence to AML regulations.

Conclusion

Taiwan’s implementation of new guidelines for cryptocurrency exchanges signifies its commitment to fostering a secure and transparent environment for cryptocurrency users. The emphasis on transparency, asset protection, and information disclosure aims to address potential risks and enhance user confidence. Collaborative self-regulation within the industry further demonstrates the commitment of major cryptocurrency exchanges to actively shape the regulatory landscape. By drawing inspiration from global frameworks and establishing a clear regulatory framework, Taiwan aims to position itself as a responsible and innovative hub for the cryptocurrency industry.

Note: The information in this article is based on the content provided and does not constitute financial or legal advice.