Taiwan's Financial Supervisory Commission to introduce new regulations: Unregistered exchanges will face criminal liability, not just fines

The Taiwan government has reached an agreement with relevant departments to address the increasing issues related to virtual asset trading. They plan to strengthen the management of this industry through amending the Anti-Money Laundering Act and introducing new regulatory measures. This includes implementing a registration system, establishing stricter capital and cybersecurity requirements, and imposing criminal liability on operators who are not registered.

Strengthening Regulation: Registration System to Be Changed First

According to reports, the Financial Supervisory Commission and the Ministry of Justice have jointly decided to amend the existing Anti-Money Laundering Act before the specialized legislation is completed. One of the major changes in this amendment is shifting the oversight of virtual asset operators from the previous loose supervision to a registration system that must comply with specific capital and cybersecurity standards.

This means that only operators meeting the government's prescribed standards can legally operate, with offenders facing criminal penalties rather than just fines.

Comparison of Capital Thresholds in Different Countries

Internationally, countries implementing similar regulatory measures have adopted different capital thresholds. For example, Japan and Hong Kong have thresholds of 10 million Japanese yen and 5 million Hong Kong dollars respectively, while the EU sets varying thresholds ranging from 50,000 to 150,000 euros depending on the type of business.

National Taiwan University Professor Yang Yueping: Short-term Amendment of AML Rules, Long-term Establishment of Special Law

Yang Yueping, Associate Professor at National Taiwan University Law School, has suggested considering the establishment of a specialized law for medium to long-term strategies. In the short term, amending the existing Anti-Money Laundering Act could address the political and legislative cost realities. He proposes clearly defining a licensing system for Virtual Asset Service Providers (VASPs) within the existing anti-money laundering framework, including specific conditions for obtaining a license and compliance requirements, with licenses revoked for violations. Additionally, rigorous enforcement can be achieved through self-regulatory norms.

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According to the Financial Action Task Force (FATF) regulations on anti-money laundering, VASPs must register or apply for a license and comply with related anti-money laundering regulations. Different countries have different implementation methods, such as the UK and Hong Kong using anti-money laundering licenses, while Singapore and Japan issue special payment institution licenses. South Korea, after amending its laws, transitioned from anti-money laundering licenses to issuing a new type of financial license similar to the EU’s.

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Alert Accounts and New Strategies to Combat Fraud

To effectively combat fraud and money laundering activities, the government is not only strengthening regulations but also planning to introduce a "alert account" regulation similar to the banking system. Under these regulations, if abnormal accounts related to fraud are detected, operators can freeze them to reduce losses for victims. Additionally, last year's amended laws added provisions for so-called "dummy accounts" to further prevent these accounts from being used for illegal purposes.

Implementation and Impact of Dummy Account Provisions

As of March 1, the new dummy account provisions officially took effect. These provisions mainly target financial institutions and virtual asset accounts, aiming to restrict the daily use of these accounts, such as daily transfer and withdrawal limits, and allowing accounts to be closed when necessary. These measures help reduce illegal activities and enhance overall financial security.

As the government continues to implement these regulatory measures, the industry and the public have higher expectations for the safety and transparency of virtual asset transactions. This not only demonstrates Taiwan's progress in the fintech field but also emphasizes the necessity of high-standard regulation in the modern economy.