As Taiwan looks to beef up its regulatory guardrails for the cryptocurrency sector, a lawmaker argues that the newly released guidelines for local virtual asset service providers (VASPs) by the country’s Financial Supervisory Commission (FSC) may lack legal enforceability.

Yung-Chang Chiang, a member of the Legislative Yuan, told The Block that a dedicated crypto asset act is necessary to regulate virtual asset firms, arguing that the country needs a separate special law to cover an asset class that is very different from traditional products. He explained:

“Under the authority of this special law, regulatory authorities can impose administrative penalties on operators who violate these self-regulation rules. Without such a special law, the regulators would lack the ability to impose penalties.” 

On Sept. 26, the FSC published some key points for overseeing Taiwan’s crypto market and VASPs. Besides noting some common industry-wide rules, such as the separation of customer assets from exchange treasury assets and virtual asset listing and delisting rules, the guidelines propose forming a potential industry association.

The special law proposed by Chiang, whose draft the lawmaker hopes to propose for first reading by the end of November or sooner, would require all crypto platforms operating in Taiwan to apply for a permit. If they failed to, regulators could order them to cease operations.

Although Taiwan’s crypto industry remains largely unregulated, the country has required VASPs to comply with the FSC’s anti-money laundering laws since July 2021.

Still, many crypto platforms operating there have yet to declare AML compliance with the FSC, Chiang said, according to the report. The lawmaker further noted that regulators can do little to address such issues without a special law in place.

Taiwan’s FSC may also propose its own version of the special crypto law, but that would likely occur mid-2024 at the earliest, according to the report, citing statements from Chiang.

The report said that the lawmaker believes their proposed special law will unlikely go through three readings during the current legislative session, which many say will conclude by year-end.