TAIWAN Trends and Developments Contributed by: James Huang, Eddie Hsiung and Maggie Huang, Lee and Li, Attorneys-at-Law
the two authorities held that Bitcoin should be considered not as a currency but as a highly speculative digital virtual commodity. This also means that digital currencies such as Bitcoin should not be considered as financial products regulated by the FSC. In another press release issued in 2014, the FSC ordered that local banks neither accept Bitcoin as a payment method nor provide any other ser - vices related to Bitcoin (eg, the exchange of bit - coins for fiat currency). Further, in another press release issued in 2022, the FSC made clear that virtual currencies, including Bitcoin, are not con - sidered currencies under the current regulatory regime in Taiwan, but are considered digital vir - tual commodities. It should also be noted that, in 2019, the FSC issued a ruling officially defining security tokens (ie, virtual currencies that have the nature of securities) as a type of security. It amended several regulations and issued rulings in Janu - ary 2020 laying out major principles, concerning: • the issuance of security tokens; • the exemption of security token offerings (STOs) from the filing obligation under the Securities and Exchange Act; and • the establishment of STO platforms. It also authorised the Taipei Exchange (TPEx) to supervise STOs. With such authority and intent to regulate the issuance of security tokens and the establishment of STO platforms, in January 2020 the TPEx promulgated: • the TPEx Rules Governing the Operation by Securities Firms of the Business of Propri - etary Trading of Security Tokens; and • the TPEx Rules Governing Information to be Published in Prospectuses for Applications
for Security Token Offerings for Over-the- Counter Trading (together with the regulations and rulings published by the FSC on STOs – the “STO Regulations”, which were further amended in 2023). Pursuant to the STO Regulations, security tokens are defined as follows. • Tokens that utilise cryptography, distributed ledger technology or other similar technolo - gies to represent their value and that can be stored, exchanged or transferred through digital mechanisms. • Tokens that are transferable. • Tokens that encompass all the following attributes of an investment: (a) funding provided by investors; (b) the provision of funding for a common enterprise or project; (c) investors expecting to receive profits; and (d) profits generated primarily on the efforts of the issuer or third parties. The FSC contemplates the application of dif - ferent regulations on STOs below or above the threshold of NTD30 million. An STO of NTD30 million or less (an “Exempted STO”) should com - ply with the STO Regulations, and the filing obli - gation under the Securities and Exchange Act may be exempted. An STO above NTD30 million must first apply to be tested in the financial regu - latory sandbox under the Financial Technology Development and Innovative Experimentation Act; if the experiment has a positive outcome, its offering may then be conducted under the Securities and Exchange Act. Pursuant to the STO Regulations, there are rules governing the issuance of security tokens. For example, as to the qualifications of the issuer, such issuer must be a company limited by shares
608 CHAMBERS.COM
Powered by FlippingBook