Finance or Technology? Taiwan's Ministry of Economic Affairs is in discussion with cryptocurrency industry players on business categories, but no decision has been made yet.
The Ministry of Economic Affairs convened the 64th meeting of the "Project Team for Business Registration Codes for Companies and Limited Partnerships" on November 15. Representatives from major exchanges ACE, BitoPro, and Maicoin were present at the meeting. The purpose of this meeting was to discuss how to categorize the business registration codes for "virtual currency platform and trading businesses" in Taiwan's major centralized exchanges. The classification into which industry sector these businesses fall under will have implications for the supervisory authority and taxation matters for the exchanges, thus attracting significant attention.
Although the discussion is ongoing, terms such as "tentatively established" and "financial industry-like" have emerged. This article interviews participants and relevant industry players to clarify the situation.
Table of Contents
Virtual Currency Platform Business Category Undecided, Different Arguments
Proposal by the Ministry of Economic Affairs: Category H - Financial, Insurance, and Real Estate
The proposal at this meeting by the Ministry of Economic Affairs is based on the definition of the Anti-Money Laundering Act and the "Prevention of Money Laundering and Counter-Terrorist Financing by Virtual Currency and Trading Business Entities" to classify entities within its jurisdiction as "Financial, Insurance, and Real Estate," under the supervision of the Financial Supervisory Commission, with a focus on anti-money laundering and counter-terrorism financing measures.
Proposal by Exchange Coin Trustees: Category I - Professional, Scientific, and Technical Services
Exchange Coin Trustees had previously proposed, based on the definitions within the Anti-Money Laundering Act and the "Prevention of Money Laundering and Counter-Terrorist Financing by Virtual Currency and Trading Business Entities," to classify entities within its jurisdiction as "Professional, Scientific, and Technical Services," under the supervision of the Financial Supervisory Commission, with a focus on anti-money laundering and counter-terrorism financing measures.
According to interviews, Exchange Coin Trustees had requested the Ministry of Economic Affairs to add a new category for virtual currency business group activities as early as July last year, hoping that by adding specific business classification, it could facilitate the establishment of an industry association to help the industry jointly develop self-regulatory norms and adapt to regulatory requirements.
During the meeting, Exchange Coin Trustees proposed whether to categorize virtual currency platforms and trading businesses under the information service industry, and to add subcategories such as virtual currency industry and detailed virtual currency platform and trading business operations. Third-party payments, also subject to financial institution supervision, are classified under the information service industry and fall under the scope of anti-money laundering measures. As blockchain technology is still evolving, the request to include the virtual currency industry under the information service industry is beneficial for the long-term technological development.
Comments from Relevant Individuals
Chairman Jian Shuyong of the Taiwan Virtual Currency Anti-Money Laundering Association:
Regarding the issue of virtual currency industry classification, it has been an unresolved issue since my time as the compliance manager at a major virtual currency exchange in Taiwan.
Back then, in order to comply with the Anti-Money Laundering Act Article 6, Paragraph 3, the implementation of anti-money laundering internal control and audit system content, operation procedures, and enforcement measures related audit methods should be determined through consultations between the central business purpose supervisory authority, the Ministry of Justice, and relevant agencies before formulation, seeking the opinions of relevant "associations." However, until the formal registration of the industry category of "virtual currency platform and trading business entities" in Taiwan, the establishment of an association based on this category was not possible. Therefore, on behalf of the virtual currency exchange I was serving at the time, in conjunction with the country's major exchanges and wallet operators, we appointed lawyers to assist the industry in jointly submitting an application to the Ministry of Economic Affairs for the addition of a new category, but unfortunately, it was not successful.
As time passed, in July 2021, the implementation of the "Prevention of Money Laundering and Counter-Terrorist Financing by Virtual Currency Platform and Trading Business Entities Anti-Money Laundering and Counter-Terrorist Financing Regulations" began. Members of the Finance Committee of the Legislative Yuan started to investigate what the actual definition of "virtual currency platform and trading business entities" entailed. Note: Article 2 of the Virtual Currency Anti-Money Laundering Act already has clear regulations, but it is still unable to grasp the existing operators in Taiwan. Businesses are encouraged to discuss the industry classification, and on November 5, the Ministry of Economic Affairs invited several virtual currency industry players and associations to a meeting for further discussion.
According to the Financial Action Task Force (FATF) Virtual Asset Service Providers updated regulatory guidelines released on October 28, 2021, it once again mentioned that governments should regulate Virtual Asset Service Providers (VASPs) through a licensing or registration system. Therefore, regardless of adopting Category H or Category I, it is imperative to find a suitable classification for virtual currency platforms and trading businesses.
Although the Taiwan Virtual Currency Anti-Money Laundering Association did not attend the previous meeting, they are optimistic about the government's active discussion on adding new categories, hoping that after the category is established, Taiwan's anti-money laundering measures for virtual currency will improve, and Taiwan may even become a model for virtual currency anti-money laundering systems, shining as a unique beacon for Taiwan!
Comments from Attendee Accountant Zheng Xugao:
According to the resolution of the 8th full committee meeting of the 4th session of the 10th Legislative Yuan on November 1, 2021, it required the Ministry of Economic Affairs, the Financial Supervisory Commission, and the Ministry of Justice to enhance horizontal coordination regarding industry governance, business operations, crime prevention, and consumer protection for industries spanning multiple professional fields like blockchain and virtual currency. Due to the involvement of multiple ministries in the administrative meeting conclusion on October 29, 2018, regarding the central purpose supervisory authority of "virtual currency platform and trading business," the Financial Supervisory Commission was designated as the central purpose supervisory authority for the "virtual currency platform and trading business entities" as stipulated in the anti-money laundering regulations, and the Ministry of Justice, together with the Financial Supervisory Commission, invited the Ministry of Economic Affairs to discuss business registration codes and the Ministry of Finance to discuss tax matters. In summary, the jurisdiction of domestic blockchain or virtual currency industry players is still under discussion.
Therefore, to fully listen to the opinions of industry players, on November 15, 2021, the Ministry of Economic Affairs proposed and discussed the addition of company registration numbers and limited partnership business codes at the meeting. Many industry players at the meeting considered the "information service industry" more suitable compared to "financial, insurance, and real estate industries," which are the business categories we have previously selected for blockchain-related industries during registration, all of which have been legally registered. Economic Affairs officials indicated that there may be further discussions on industry classification following the opinions received, so the conclusion of this meeting on the operational plan for company registration numbers and limited partnership business codes on November 15, 2021, has not yet been confirmed as a financial industry. It is still open for discussion. According to relevant officials from the Ministry of Finance, discussions on virtual currency taxation issues are currently underway, and relevant regulations may be announced soon, which may cover business taxes, income taxes, consumption taxes, etc. The classification of the aforementioned industries may also affect the "Standard Classification of Industries for Tax Industry and Inter-Industry Profit Standards," which will impact matters such as industry categories to be filled in tax declarations, industry tax rates, and calculation of relevant taxes.