TAIWAN Trends and Developments Contributed by: Robin Chang, Ken-Ying Tseng and Eddie Hsiung, Lee and Li, Attorneys-at-Law
as needed, conduct interbank transfers, and use wholesale CBDCs as the settlement asset. • Delivery versus Payment (DVP) for Tokenised Assets – focusing on security tokens issued by financial institutions (Security Token Offerings), the platform will enable delivery versus payment transactions between security tokens and deposit tokens, with wholesale CBDCs serving as the set- tlement asset. • Special Purpose Digital Money – currently, when government agencies collect bid deposits from bidding vendors during tenders, the process is still handled manually and with paper-based meth- ods. Using special purpose digital tokens could significantly improve operational efficiency. The proposed improvement involves combining deposit tokens with smart contracts to create “bid deposit tokens”. Once the bidding process concludes, the shared tokenisation platform would automatically convert the bid deposit tokens back into deposit tokens for unsuccessful bidders. For winning bid- ders, the bid deposit tokens would automatically be converted into performance bond tokens, which would then be converted back into deposit tokens once the contract is completed. According to the central bank’s reports and related news releases, although these initiatives are moving forward, the central bank has not yet set a concrete timeline for the official issuance of a CBDC. Law and practice regarding anti-fraud and fraud prevention In recent years, Taiwan has seen many cases of fraud and money laundering involving virtual assets. In terms of anti-money laundering (AML), virtual-asset regulation in Taiwan is now incorporated within the AML frame- work. As for fraud prevention, Taiwan’s Legislative Yuan (ie, its congress) passed the Fraud Crime Hazard Pre- vention Act in 2024, with VASPs also included within its scope. The Act establishes a joint mechanism for fraud prevention, aiming to facilitate communication among industry participants when individual cases show signs of potential fraud. The goal is to detect fraudulent activity during its early stages and thereby reduce the occurrence or impact of actual fraud cases. This development reflects the Taiwanese government’s strong focus on combating fraud.
In practice in Taiwan, it is common to see industry players collaborating with law enforcement agencies – such as the prosecutors, Investigation Bureau and the police – by providing educational training and other resources as well as technical support related to blockchain and virtual-asset issues. There is also growing participation from start-ups within the eco- system offering services like blockchain forensics, transaction monitoring, and flow analysis, which they provide to virtual-asset trading platforms and, in the future, may offer to financial institutions as well. These surrounding virtual-asset services not only contribute to a more complete ecosystem in Taiwan but also provide valuable support for criminal investigations involving virtual assets. Moreover, they could assist in future civil enforcement actions seeking recovery of virtual assets. Stablecoins Stablecoins have recently become a highly debated topic in Taiwan, particularly because the draft Virtual Asset Service Act (“Draft Act”) includes a dedicated section on them. The provisions in the Draft Act align with many international standards – for instance, requiring an approval for issuance, restricting issuers to financial institutions, mandating 100% reserves, and prohibiting the payment of interest. From a commercial perspective, however, much of the discussion centers on what the actual use cases for stablecoins are. Beyond potentially serving as the pay- ment consideration for purchasing Real-World Assets (RWA) in the future, are there other applications? Taiwan boasts a powerful manufacturing sector that traditionally exchanges its exports for US dollars. If international customers begin requiring the use of USD-backed stablecoins, this presents a significant opportunity for adoption. But beyond these rather industrial uses, are there unique use cases for the average consumer? For example, could stablecoins (specifically TWD-backed ones) be used for everyday retail transactions in the future? How would this differ from current/existing electronic payment methods? Moving forward, these commercial considerations are just as vital to explore as the legal dimensions of the Draft Act.
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