Taiwan passes key crypto law, raising the bar with with licensing, reserve mandates, and tough penalties

Taiwan has taken a major step forward in overseeing its digital asset sector by enacting comprehensive new regulations for cryptocurrency operations.

On Tuesday, lawmakers in the Legislative Yuan approved the Virtual Asset Service Act during its third reading, forwarding it to President Lai Ching-te for formal signing, which is anticipated within the next ten days.

Once signed, the Executive Yuan will set the official start date for the rules.

The legislation requires all virtual asset service providers, including cryptocurrency exchanges and platforms, to secure explicit licensing from the Financial Supervisory Commission (FSC) before they can legally operate in the country.

It also brings in tougher standards around cybersecurity protections, keeping customer funds separate from company assets, and strengthening internal governance and risk management.

Platforms that are already registered for anti-money laundering compliance will receive a 12-month grace period to submit license applications and up to 21 months in total to obtain full FSC approval and any other required permits. Until now, crypto businesses operating in Taiwan only needed to register for anti-money laundering compliance.

Those involved in the stablecoin business face tougher hurdles. First, they must win approval from both the central bank and the FSC, while maintaining 100% asset reserves at all times. Stablecoins are cryptocurrencies whose values are pegged to an external reference such as the U.S. dollar or other national fiat currencies. The BIS recently warned of foreign-exchange risk posed by dollar-pegged stablecoins.

The law also introduces serious consequences for breaking the rules. Unauthorized operation of crypto platforms or stablecoin services could result in prison sentences of up to seven years and penalties of up to NT$100 million (about $3.14 million).

Meanwhile, market fraud or price manipulation offenses carry even stiffer sanctions: three to ten years behind bars and fines ranging from NT$10 million to NT$200 million.

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