TAIWAN Law and Practice Contributed by: Robin Chang, Ken-Ying Tseng and Eddie Hsiung, Lee and Li, Attorneys-at-Law
tures. They must not grant traditional shareholder rights (such as voting). • Investor Criteria – participation is generally limited to professional investors. For natural persons, there is a TWD300,000 investment cap per STO. Recent 2022 updates by the FSC and TPEx have slightly expanded eligibility to include certain qualified foreign investors. • Operational Protocol – STOs must be hosted on a single designated platform. The platform opera- tor is tasked with verifying issuer credentials and ensuring a prospectus is prepared. If the platform operator intends to issue its own tokens, it must Cryptocurrencies that do not function as securities are governed primarily by Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) frameworks, specifically the VASP Registration and VASP AML Regulations. Specifically, VASPs offering virtual-asset exchange services must disclose key details about the virtual assets, including the token’s whitepaper, which should contain information about the issuer, among other things. Also, a VASP providing virtual-asset trading platform services must establish criteria for reviewing virtual-asset launches. These criteria should cover, among other factors, information about the issuer and the legal risks associated with the issuer. 2.5 Market Abuse Security Token Offerings Under the current STO framework, if a customer fails to fulfil their settlement duties, the securities firm (act- ing as the platform operator) must cancel the transac- tion. Following immediate notification to the customer, the firm is responsible for seeking compensation. Beyond these default procedures, the STO regulations do not currently contain specific provisions address- ing market integrity or the prevention of market abuse by traders. Non-Security Tokens While no specific laws currently govern market abuse for virtual assets, the VASP Guidelines mandate that providers ensure all trading is conducted fairly and transparently. To achieve this, VASPs must implement obtain prior approval from the TPEx. Non-Security Tokens (Virtual Assets)
market-monitoring mechanisms – such as alerts for abnormal price swings – alongside rules to prevent market abuse and conflicts of interest. Furthermore, under VASP Registration Regulations, exchange service providers are required to maintain and publicly disclose a conflict-of-interest policy. They must also take proactive steps to safeguard custom- er interests, specifically ensuring that all exchange orders are processed both promptly and fairly. 2.6 Non-Compliance Security Tokens There have been no major announced cases involving enforcement actions for violations. Non-Security Tokens There has been frequent discussion regarding illegal depositing taking under banking law or illegal fund- raising in violations of the securities regulation. In a recent case, a service provider claimed during their service offering that they were not accepting fiat cur- rency, but rather stablecoins. The prosecutor pro- ceeded with an indictment, but the judgment has not yet been finalised. If the activities are carried out offshore, the aforemen- tioned legal issues will theoretically still apply unless the operations are conducted entirely offshore. These regulatory and judicial stances are unlikely to change within the next 12 months. 3. Licensing and Set-Up Requirements 3.1 Licensing Requirements Security Tokens An STO platform may only be operated by entities licensed as a securities dealer. Existing securities firms intending to engage in such business must obtain prior approval from FSC. Furthermore, entities that are not currently licensed as any kind of secu- rities firms may also apply to the FSC for a licence specifically permitting them to conduct business of proprietary trading of virtual assets.
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