TMT 2025

TAIWAN Trends and Developments Contributed by: Jaclyn Tsai, Teresa Huang, Jaime Cheng and Lilian Hsu, Lee, Tsai & Partners

C. Regulations for financial institutions conducting businesses related to virtual assets The FSC previously took a conservative approach regarding financial institutions’ involvement in virtual asset-related businesses. For example, in a 2014 press release, it stated that “banks and other financial institutions are prohibited from accepting or exchanging Bitcoin, and from offering Bitcoin-related services via their ATMs”. However, there has been a recent shift in policy, with the FSC now exploring the possibility of allowing financial institutions to engage in lim - ited virtual asset businesses. (1) Custody businesses On 28 November 2024, the FSC announced that financial institutions could apply for a busi - ness trial for virtual asset custody businesses between January and April 2025. Financial insti - tutions must submit relevant documents such as their plans regarding custody models, customer service, compliance measures and security for application. The trial period is expected to last approximately six months, with a review period of about two months. (2) ETF sub-delegation businesses On 30 September 2024, the FSC announced that professional investors would be allowed to invest in foreign virtual asset exchange-traded funds (ETFs) through sub-delegation. Securities firms executing such trades must confirm that the client qualifies as a professional investor, and assess the client’s investment knowledge and experience related to virtual assets prior to their first purchase to ensure the suitability of invest - ing in virtual asset ETFs. Securities firms have responded positively to this policy. The first firm to act on it launched more than 70 US virtual asset ETFs on 24 December

• Establishing necessary risk management mechanisms, internal controls and auditing systems for AML/CFT. To ensure VASPs comply with the aforemen - tioned regulations, the FSC has intensified its enforcement of AML measures. In addition to designating “AML issues” as a key focus in VASP financial inspections, the FSC imposed fines of millions of TWD on four major Taiwanese VASPs for AML deficiencies in 2024. (3) FCHPA As blockchain technology facilitates rapid fund transfers and provides a certain level of anonym - ity, it poses a risk of being exploited by fraud groups for the transfer of proceeds of crime. Therefore, the FCHPA and its associated regu - lations require VASPs to comply with fraud pre - vention obligations similar to those of financial institutions. For further details, please refer to the section on “II.B. Key Anti-Fraud Obligations Across Industries”. (4) Self-regulatory codes Compared with the above requirements, the self-regulatory codes announced by the Asso - ciation are more technical and detailed, address - ing issues such as the listing and delisting review of virtual assets, customer protection and AML/ CFT. Since the VASP registration regime requires VASPs to join the Association and comply with its self-regulatory codes, failure of compliance may result in the FSC either rejecting the VASP’s registration application or revoking the registra - tion of an already registered VASP. Consequent - ly, these codes hold a certain degree of manda - tory force for VASPs.

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