In response to Taiwan's anti-money laundering regulations in July, the hybrid decentralized exchange JOYSO voluntarily ceased operations at the end of June.
The Financial Supervisory Commission of Taiwan has announced that the "Regulations Governing Anti-Money Laundering and Countering Terrorism Financing for Virtual Currency Platforms and Businesses" will be implemented on July 1. The regulations cover a wide range of activities, requiring not only exchanges but also many virtual currency-related businesses registered in Taiwan to conduct KYC/AML anti-money laundering measures. The well-known hybrid decentralized exchange JOYSO was the first to announce the suspension of services at 4:00 PM Taiwan time on June 30.
The regulations specify the following regulated activities:
- Exchange between virtual currency and New Taiwan Dollar, foreign currencies, and currencies issued in Mainland China, Hong Kong, or Macau.
- Exchange between virtual currencies.
- Transfer of virtual currencies.
- Storage, management of virtual currencies, or provision of related management tools.
- Participation in and provision of financial services related to the issuance or sale of virtual currencies.
Table of Contents
JOYSO DEX Service Suspension Notice
Below is the original announcement from JOYSO official statement:
"To comply with the anti-money laundering regulations related to virtual currency that Taiwan will implement starting from July 1, 2021, Consensus Technologies is expected to cease providing decentralized services ETH JOYSO DEX and TRON JOYSO DEX on June 30, 2021 at 4:00 PM.
Users are advised to promptly withdraw their virtual currency from their platform to their wallets. After 4:00 PM on June 30, the JOYSO website will no longer offer any deposit, trading, or withdrawal services. Users must initiate withdrawals through smart contracts at their own risk.
After the closure of JOYSO DEX, users can still trade JOY and T1~T6 tokens on UNISWAP. We appreciate your understanding and cooperation. Please spread the word. JOYSO will continue to strive in the development of decentralized applications in the future. Thank you for the long-standing support from all JOYSO supporters."
Decentralized Exchanges Fall under Regulatory Scope
Why do decentralized exchanges need to be concerned about Taiwan's anti-money laundering regulations? It seems that providing "exchange services between virtual currencies" is sufficient to be regulated.
In theory, operators who do not custody, manage virtual currencies, or manage private keys are not within the scope of regulation. However, due to the concept of "hybrid decentralization," entities that custody virtual currencies may fall under regulation.
As JOYSO DEX is a hybrid decentralized exchange, connecting self-managed cryptocurrency wallets like MetaMask to JOYSO DEX allows funds to be deposited into its smart contracts, providing matching trading services for an efficient trading experience. Therefore, JOYSO's smart contracts custody users' virtual currencies and provide exchange services, potentially bringing it within the regulatory scope.
DEX Not Explicitly Listed for Regulation, Operators Self-Regulate for Safety
On the other hand, the well-known Taiwanese decentralized exchange Starbit ceased operations earlier, shifting its focus to the NFT platform Jcard. The original announcement reads:
"To comply with the regulations of the Executive Yuan's announcement on the scope of virtual currency platform and trading business, after careful evaluation by the operating team, this website will temporarily terminate all services of STAR BIT EX starting from 23:59 on April 30, 2021. It will be upgraded to the NFT exchange platform ‘Jcard’ and will gradually enhance compliance with relevant legal requirements."
According to interviews with these two operators, despite the regulations not explicitly mentioning decentralized exchange DEX regulation, they proactively self-regulate due to compliance risks.
Will Uniswap be Regulated under Taiwan’s Anti-Money Laundering Regulations?
Uniswap is the largest decentralized exchange on Ethereum, providing trading and liquidity pools for users to transfer virtual currency assets. Behaviorally, it also fits the criteria for regulated entities. However, will the Financial Supervisory Commission regulate it?
The answer is likely no. The second clause of the regulations clarifies, "The business mentioned in the preceding paragraph shall be limited to those registered domestically." That is, businesses established within Taiwan are within the regulatory scope.
As mentioned earlier, JOYSO is registered in Taiwan under a foreign name, thus also qualifies for regulation:
Incidentally, in China, Uniswap has already been blocked by the Great Firewall:
