The Evolution of Cryptocurrency Regulations in Taiwan: A Case of Progressive Conservatism

Ruisiang
5 min readJun 13, 2023

In the dynamic world of digital assets, Taiwan stands out as an interesting case study. Taiwan’s regulatory approach to cryptocurrencies appears to be one of progressive conservatism, where the government maintains cautious oversight while also acknowledging the potential of this burgeoning industry. This balance is being tested as Taiwan’s telecommunications giant, Taiwan Mobile, has reportedly entered discussions with local crypto platforms about potential collaborations and even investments​​.

Taiwan Mobile’s potential entry into the digital asset space indicates a significant shift. The move could pave the way for other large institutions to consider similar ventures, particularly as the Web3 sector matures and regulatory clarity emerges​​. Notably, Taiwan Mobile is said to be in talks with blockchain-enabled financial institutions, including Taiwan-based XREX, which provides crypto-fiat exchange services to help cross-border small and midsize enterprises​.

The regulatory landscape in Taiwan, however, presents a unique set of challenges. The Central Bank in Taiwan does not currently recognize cryptocurrencies as currency. Local banks are prohibited from accepting Bitcoin or providing any services related to Bitcoin, such as the exchange of Bitcoin for fiat currency​​. As of now, there are no required licenses in Taiwan for operating services of exchange between virtual currencies or virtual currencies with fiat currencies​​.

Despite these constraints, Taiwan has shown some flexibility in its regulations. For example, the Financial Supervisory Commission (FSC) recognizes the sale of Bitcoin as a sale of a digital “virtual commodity” and not a “currency”​​. Moreover, Taiwan has developed regulations governing the offering and issuance of security tokens, which are cryptocurrencies that have the nature of securities​​.

The FSC has also outlined its stance on Initial Coin Offerings (ICOs), stating that the classification of an ICO should be determined on a case-by-case basis, with the issue of whether tokens in an ICO would be deemed “securities” under the Securities and Exchange Act (SEA) depending on the facts of each individual case​​.

It’s important to note that the current regulatory landscape in Taiwan is fluid and subject to change. As the digital asset industry seeks to recover from a $1.5 trillion market rout last year, various jurisdictions, including Taiwan, are attempting to strike a balance between protecting customers and attracting digital-asset investment​​.

In this context, Taiwan Mobile’s potential investment in a local crypto platform could serve as a bellwether for the country’s evolving stance on digital assets. It’s a small yet significant step in the long road towards full acceptance of cryptocurrencies in the traditional financial sector. As Wayne Huang, the co-founder of XREX, put it, larger institutions will likely enter the Web3 sector as it matures and regulatory clarity emerges​​.

While the cautious approach taken by Taiwanese authorities has its merits, it is crucial to ensure that this does not stifle innovation in a sector with so much potential. To strike the right balance, authorities need to continue to engage with the industry, learning from the experiences of other jurisdictions, and adapting their regulatory frameworks as necessary.

Taiwan Mobile’s potential venture into the crypto space could serve as a catalyst for this process, prompting a reassessment of the current regulatory environment and paving the way for further integration of digital assets into the mainstream financial sector. This move, if it materializes, could mark a significant milestone in Taiwan’s journey towards embracing the potential of digital assets, while also ensuring robust consumer protection.

Despite the uncertainties, one thing is clear: Taiwan is at a crucial juncture in its approach to cryptocurrency regulation. The cautious approach taken by Taiwan’s regulators could be seen as a reflection of the larger global trends in crypto regulation. As countries grapple with how to regulate this nascent industry, they are often caught between a desire to foster innovation and the need to protect consumers and maintain financial stability. Taiwan’s case illustrates this tension well.

While Taiwan’s regulations currently do not accept cryptocurrencies as legal tender, it does not mean that the country is entirely closed off to these digital assets. For instance, the FSC’s stance on the sale of Bitcoins as a digital “virtual commodity” signifies a certain degree of openness towards cryptocurrencies​​. Similarly, the regulations around the offering and issuance of security tokens indicate a willingness to accommodate certain aspects of the cryptocurrency space within the existing legal framework​​.

However, as Taiwan Mobile potentially forays into the crypto space, the country will have to reassess its regulatory stance. If the telecom giant indeed partners with or invests in a crypto platform like XREX, it could create a precedent for other large institutions in Taiwan to follow suit. The entry of such large players into the crypto market could potentially push the regulators to evolve their stance and make the regulations more conducive for the growth of the crypto industry.

While the current regulatory environment in Taiwan is more conservative, there is a clear understanding among the regulators of the transformative potential of cryptocurrencies. The regulations around ICOs and security tokens are examples of the government’s attempt to understand and regulate these complex digital assets without stiffening innovation​​.

The role of regulatory sandboxes also cannot be overlooked. For security token offerings above NT$30 million, the FSC requires these offerings to first be tested in a “financial regulatory sandbox”. The results of these experiments could inform future regulations and provide valuable insights into how to safely integrate these new types of assets into the financial system​.

Overall, Taiwan’s approach to cryptocurrency regulation is a fascinating example of a country grappling with the challenges and opportunities presented by digital assets. The potential entry of Taiwan Mobile into the crypto space could serve as a significant turning point in Taiwan’s crypto regulation journey, possibly prompting a re-evaluation of current laws and opening the door to more comprehensive and thoughtful regulations in the future. It will be interesting to observe how Taiwan’s regulatory environment evolves in the coming years and what impact this will have on the broader adoption and acceptance of cryptocurrencies in the country.

As the crypto industry continues to mature and as regulatory clarity emerges, it’s clear that the relationship between cryptocurrencies and traditional financial institutions will continue to evolve. Taiwan’s case provides an intriguing glimpse into the future of this relationship, highlighting the potential for integration, collaboration, and mutual growth. The road ahead may be uncertain, but it’s certainly an exciting time for the intersection of traditional finance and digital assets in Taiwan.

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Ruisiang

Blockchain and Backend Developer, Privacy Advocate, Crypto Enthusiast. Twitter: ruisiang_tw