Three major challenges in virtual currency regulation in Taiwan, Professor Yang Yueping: The ACE exchange incident exposes all regulatory issues in the country

Economic Daily News conducted an interview on the chaos and regulatory status of virtual currencies in Taiwan. Yang Yue-Ping, Associate Professor of Law at National Taiwan University, believes that the "ACE King Exchange incident has exposed all the regulatory issues of virtual assets in Taiwan."

Against the backdrop of global attention on the approval of a Bitcoin spot ETF in the United States, Taiwan's cryptocurrency market has experienced a severe shake-up. Just before the approval of the Bitcoin spot ETF in the U.S., a major fraud case involving the ACE King Exchange, a virtual currency trading platform in Taiwan, shocked the industry, highlighting three major challenges facing the Taiwanese virtual asset market.

Regulatory Compliance Statement Operator Arrested, Regulatory Blank

As one of the top three cryptocurrency exchanges in the country, Ace Exchange was once the preferred choice for many investors. However, a recent police investigation revealed that the exchange used false advertising to deceive investors into purchasing worthless cryptocurrencies, involving an amount as high as 1 billion NTD. What's even more shocking is that prominent lawyer and operator of Ace Exchange, Wang Chen-Huan, was arrested in connection with this case. This is not only the first time in the country that an operator subject to a compliance statement from the Financial Supervisory Commission has been accused of fraud, but it also exposes deeper issues in Taiwan's virtual asset market.

Regulatory Vacuum: Crisis in Taiwan's Virtual Asset Market

Taiwan's virtual currency market is facing serious challenges. While international regulations on virtual assets are rapidly evolving, such as the approval of Bitcoin spot ETF in the United States and the passing of the Markets in Crypto-Assets Regulation (MiCA) in the EU, Taiwan is still struggling in a regulatory vacuum.

Associate Professor Yang Yueh-Ping from National Taiwan University's Law School stated, "The Ace Exchange incident has exposed all the regulatory issues in the domestic virtual asset market," including the lack of supervision over virtual currency issuers, except for Security Token Offerings (STOs) which fall under regulation, while other cryptocurrencies do not.

According to Wen Hung-Chun, CEO of Biyate Technology, if the listing standards of a stock exchange were applied to the Ace Exchange incident, many deficiencies would be revealed.

Financial officials also mentioned that monitoring fiat currency flows is easily regulated, but once they are converted into virtual currencies, it becomes a blind spot. They suggest applying traditional financial regulatory methods to manage issuers, exchanges, and responsible individuals.

Professor Yang: Self-regulatory review of listings lacks binding force

Associate Professor Yang Yueh-Ping expressed that the guidance principles published by the Financial Supervisory Commission, requiring industry associations to self-regulate and establish mechanisms for reviewing listings, do not have strong substantive binding force.

The regulation of Taiwan's virtual asset market is not only lagging behind but also lacks specific laws to protect investors. The absence of legal regulations results in a market filled with risks, with the Ace Exchange case being just the tip of the iceberg among numerous fraudulent incidents.

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Rapid Evolution of Foreign Regulations, Taiwan Lacks Even a First-Generation Special Law

Associate Professor Yang Yueh-Ping mentioned that foreign regulations have already discussed the management of virtual assets, while Taiwan is still focused on anti-money laundering and custody, unable to keep up with trends. Taking the framework of the European MiCA as an example, there is already a comprehensive plan for asset management and advisors.

Foreign laws have undergone multiple iterations, while Taiwan does not even have a first-generation special law, let alone keeping up with international standards.

For instance, domestic operators are not allowed to issue Bitcoin spot ETFs, potentially causing legal operators to be unable to operate while unregulated ones can use the name of a Bitcoin fund to raise funds, creating a larger gap in investor protection.

Can Regulatory Efficiency Keep Up?

Although the Financial Supervisory Commission has started conducting financial inspections on virtual asset operators, without the support of special laws, these efforts may have limited practical utility.

The lesson learned from the Ace Exchange incident is that relying solely on existing anti-money laundering measures is insufficient to cover the increasingly complex regulatory requirements of virtual asset transactions. Taiwan needs a more comprehensive and forward-looking virtual asset regulatory strategy to safeguard investor interests and promote industry's healthy development.

Taiwan's virtual asset market is at a critical juncture; the Ace Exchange incident serves not only as a warning bell but also as an opportunity to highlight the urgency and importance of virtual asset regulation. As international pace on virtual asset regulation accelerates, Taiwan urgently needs to catch up to ensure it does not fall behind global development trends.