Special law for virtual asset management is coming: FSC announces four-stage management plan, to be submitted to the Executive Yuan in June 2025

The formulation of the Virtual Asset Service Providers (VASP) Act has finally made clear progress. Financial Supervisory Commission Chairman, Thomas Huang, will report to the Finance Committee on the 12th, planning to gradually promote the regulation of virtual asset operators in four phases. The draft legislation is expected to be submitted by the end of 2024, with plans to complete the draft and submit it for parliamentary review by June 2025.

Financial Supervisory Commission (FSC) Publicly Confirms the Establishment of Special Regulations

This is the FSC's first public disclosure detailing the timeline and plan for establishing special regulations for virtual asset management. The regulations will take into account international regulatory standards, focusing on six regulatory key points including operator licensing conditions, consumer protection, capital requirements, asset management, market trading behavior norms, and business development.

Phase One: Supervision of Virtual Asset Operators

In the first phase, the FSC will start supervising relevant operators from Virtual Asset Service Providers (VASPs) by focusing on anti-money laundering measures. Currently, 25 operators have completed compliance declarations, covering business models such as exchanges, trading platforms, physical storefronts, Bitcoin Teller Machines (BTMs), and custody system providers.

Phase Two: Establishment of Association and Formulation of Self-Regulatory Rules

In the second phase, the FSC will promote the establishment of an association by VASPs and the formulation of self-regulatory rules. The association will formulate self-regulatory rules based on the eight guiding principles set by the FSC. It is expected that this Thursday (the 13th), VASPs will officially establish the association.

Phase Three: Strengthening Anti-Money Laundering Law Management

In the third phase, the FSC will add VASP registration requirements to the anti-money laundering laws, clearly defining VASPs and imposing criminal penalties on illegal operators. VASPs engaging in business without proper registration may face up to two years in prison and a fine of up to 5 million NT dollars. The FSC plans to differentially manage registered VASPs based on the complexity of their business.

VASPs operating as exchanges must adhere to comprehensive internal control regulations, including matching trading rules explanation, information system compliance with ISO27001 information security requirements, wallet management with at least more than half in cold wallets, and separation of platform and customer assets.

Among the 25 VASPs that have completed anti-money laundering compliance declarations, such as ACE, BitoPro, MaiCoin, XREX, and HOYA, all operate as exchanges and must adhere to the complete regulations.

Phase Four: Drafting Special Regulations

The final stage will move towards drafting special regulations. In January 2024, the FSC will outsource the study of VASP management regulations, taking into account various countries and international standards to determine the six major regulatory key points. The research team is expected to submit the final report by the end of September 2024 and present the draft special regulations by the end of the year, holding a public hearing. The FSC plans to submit the draft special regulations to the Legislative Yuan for review by June 2025.

This marks the first time the FSC has clearly revealed the plan for promoting special regulations for virtual asset management, demonstrating the government's attention to the virtual asset market. With the gradual establishment and implementation of special regulations, the market is expected to see a more regulated and secure development environment, further safeguarding the rights of investors.