TAIWAN Law and Practice Contributed by: Robin Chang, Sarah Wu and Eddie Hsiung, Lee & Li
cial services industry will have even more applications of this technology in the future. 10.2 Local Regulators’ Approach to Blockchain Apart from the regulations relating to cryptocurren - cies mentioned in this article, the Taiwan government has not introduced any new regulations following the emergence of blockchain. However, two policy trends have been reported in local news: • The Central Bank has established a special task force to study Central Bank Digital Currency (CBDC), which is commonly referred to as the digital New Taiwan Dollar. The task force has com - pleted two exploratory projects on the possibility of issuing “wholesale CBDC” for financial institutions and “retail CBDC” for the general public. Regarding “wholesale CBDC”, the Central Bank observed that a platform built with distributed ledger technology (DLT) does not necessarily outperform a platform with a centralised system. • Please see 10.4 Regulation of “Issuers” of Block- chain Assets for real world assets (RWAs). 10.3 Classification of Blockchain Assets In December 2013, the Central Bank and the FSC ini - tially conveyed the government’s stance on bitcoin through a joint press release (the “2013 Release”). As outlined in the 2013 Release, both authorities asserted that bitcoin does not qualify as “legal tender”, “curren - cy” or a “generally accepted medium of exchange”. Instead, they classified it as a highly speculative digi - tal virtual commodity. Furthermore, in March 2022, the FSC issued another press release affirming that crypto-assets, including bitcoin, are not recognised as currencies within the existing regulatory framework in Taiwan. Instead, these assets are considered digital virtual commodities. Addressing the proliferation of initial coin offerings (ICOs) and other fundraising and investment activities involving virtual currencies or cryptocurrencies, the FSC released a press statement in December 2017 (the “2017 Release”) articulating its stance on ICOs. According to the 2017 Release, an ICO involves the issuance and sale of virtual commodities (such as dig - ital interests, assets or virtual currencies) to investors.
The categorisation of an ICO is contingent on a case- by-case assessment. If an ICO encompasses the offer and issuance of securities, it falls under the purview of Taiwan’s Securities and Exchange Act (SEA). Whether tokens in an ICO are deemed securities under the SEA is contingent on the specific circumstances of each case. In July 2019, the FSC officially designated cryptocur - rencies as having the nature of securities (ie, so-called “security tokens”) under the SEA (the “2019 Ruling”). According to the 2019 Ruling, security tokens refer to those that: (1) utilise cryptography, DLT or other similar technologies to represent their value that can be stored, exchanged or transferred through digital mechanisms; (2) are transferable; and (3) encompass the following attributes of an investment: (a) funding provided by investors; (b) funding provided for a com - mon enterprise or project; (c) investors expecting to receive profits; and (d) profits generated primarily on the efforts of the issuer or third parties. 10.4 Regulation of “Issuers” of Blockchain Assets For Security Tokens In 2020, the FSC, in collaboration with the Taipei Exchange (TPEx), embarked on the development of regulations governing tokens having the nature of securities. Below are certain key rules under the STO regulations: • Amount restriction: For STOs with a value of TWD30 million or less, the issuance may be car - ried out following the STO regulations. For STOs exceeding TWD30 million in value, the issuing entity must first undergo evaluation within the regulatory sandbox as discussed in 2.5 Regulatory Sandbox . • Qualifications of the issuer: The issuer must be a Taiwan-incorporated company limited by shares not traded on the Taiwan Stock Exchange or TPEx, or the Emerging Stock Market of the TPEx. Foreign entities are barred from acting as issuers in STO programmes. • Types of security tokens: Permissible security tokens are limited to profit-sharing or debt tokens without shareholder rights.
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