Taiwan is set for special crypto legislation with its ranking financial regulator – Financial Supervisory Commission (FSC), tasked with oversight and enforcement duties. News of the looming enactment of crypto legislation emerged following the disclosure by FSC chairperson Huang Tien-mu to the country’s lawmakers.
FSC Announcement as Primary Crypto Regulator
In his address to Taiwan’s parliament, Tien-mu revealed that accomplishing the global banking stability objective was paramount for the Asian country. He added that accomplishing banking stability is challenging when pursued in the exclusion of the crypto industry. As reported by Bloomberg, the plans outlined that the legislation would imminently announce FSC as the primary regulator of digital assets in the country.
Supporting the move by FSC in collaboration with Taiwan’s lawmakers, XREX chief executive Wayne Huang indicated the move was welcome as it would stimulate nationwide adoption and growth of digital assets. The firm’s co-founder lauded the devotion of the FSC chair to accomplish regulatory clarity.
Huang challenged fellow executives to support the move since the collaboration between crypto service providers, and FSC would deliver a comprehensive regulatory climate. He assured the active input that Xerex would assume will prioritize assisting the formation of the sector’s self-regulatory entity in developing requisite operating standards.
Exclusion of Non-fungible Tokens from FSC Oversight
Bloomberg report cited legislature sources revealing that FSC will overlook regulating the non-fungible tokens (NFTs). The report referred to local Taiwan media that quoted Huang’s pronouncement that NFTs are in infancy. Consequently, the FSC chair considers NFTs as a relatively young asset class.
Previous statements conveyed by Tien-mu-led FSC portray NFTs as exhibiting unique composability and extendability. Huang echoes FSC findings that NFTs have diverse representation ranging from commercial items to commodities and securities. The diversity mandates FSC to plead for more time to establish proper guidelines for NFT classification.
The revelation made by FSC’s chair would bring missing regulatory clarity considering that the Central Bank of the Republic of China regulates Taiwan. While the Central Bank exercises oversight over monetary policy formulation and enforcement, FSC assumes broader oversight. In particular, FSC oversight extends from banking regulation, futures, securities and anti-money laundering.
Prioritize Safeguarding Investment and Experimentation
Maicoin chief executive Alex Liu revealed that the legislation should prioritize balancing safeguarding investors and experimentation. The submissions made before Taiwan’s lawmakers have brought two factions into the legislation. The first faction of lawmakers proposes that the Ministry of Digital Affairs (MODA) should become the primary crypto regulator. Others dismiss MODA alleging that the ministry is still within the infancy stage and needs more experience, unlike FSC.
Liu waded into the debate by indicating that FSC mirrors the military that utilizes guns and bullets. The new legislation would match newly introduced laser guns. Liu challenged the stakeholders to weigh between positioning the laser weapon under the defense ministry or establishing a unit for directed energy weapons.
Taiwan Responding to FTX Collapse
Taiwan’s announcement is a direct response to the 2022 crypto market meltdown worsened by the catastrophic downfall of FTX, Terra and Three Arrows Capital. Historically, the country has portrayed a hands-off approach in its oversight role to digital asset operations. The existing crypto regulation prioritizes digital assets supervision within the anti-money laundering (AML) framework.
Recently, Taiwan authorities greenlighted 24 crypto operators to establish shops upon proof of satisfying the AML system. The sudden implosion of FTX in November 2022 watered down the September approval. Instead, it triggered urgency for the country’s push towards a regulatory framework.
The move to accomplish regulatory clarity following the FTX downfall and resulting contagion was necessary, considering that Taiwan had the leading country in FTX exchange usage per capita. Besides, the country had high-interest rates for US dollar deposits relative to the local banks’ scale.
With the support for special legislation on crypto, Taiwan is set to expedite delivering regulatory clarity. As such, Tien-mu illustrated that Taiwan would have the preliminary framework by June 2023 and the initial legislation draft six months later.