Bumpy road to navigating Taiwan’s crypto conundrum

Cryptocurrencies are currently not accepted as currencies in Taiwan. Since 2013, the positions of both the central bank and Financial Supervisory Commission (FSC) concur that Bitcoin should not be considered a currency, but a highly speculative digital virtual “commodity”.

Since 2014, local banks have been ordered by the FSC not to accept Bitcoin or provide any services related to the cryptocurrency. Subsequent announcements and rulings by the FSC have upheld the same view.

Otherwise, no laws or regulations have been officially promulgated or amended to specifically deal with cryptocurrencies, except for:

1. 1. regulations governing tokens with the nature of securities, which are commonly called “security tokens”, and their offerings commonly called security token offerings (STOs); and
   2. anti-money laundering (AML) related regulations for virtual asset service providers (VASPs).

Token offerings

The core regulatory issue regarding a token offering, such as an initial coin offering (ICO), is whether it would be considered an offering of securities under Taiwan’s securities regulations. If so, it is subject to Taiwan’s Securities and Exchange Act (SEA).

If considered to involve an offer and issue of securities (so tokens are considered security tokens), it would be an illegal fundraising activity in violation of the SEA unless STO regulations are followed.

Security tokens and STOs

In 2019, the FSC officially issued a ruling designating cryptocurrencies with a certain nature as “securities” (i.e. security tokens) under the SEA.

Accordingly, security tokens refer to those that:

• • Utilise cryptography, distributed ledger technology or other similar technologies to represent their value that can be stored, exchanged or transferred through a digital mechanism;
  • Are transferable; and
  • Encompass all of the following attributes of an investment:

1. 1. Funding provided by investors.
   2. Providing funding for a common enterprise or project.
   3. Investors expecting to receive profits.
   4. Profit generated primarily from the efforts of the issuer or third parties.

The FSC and the Taipei Exchange (TPEx) jointly worked on a set of regulations governing STOs, which were finalised in 2020 and further amended in 2023.

The regulations are differentiated by the threshold of NTD30 million (USD930,000). An STO of NTD30 million or less may be conducted in compliance with the STO regulations. An STO above NTD30 million must first apply to be tested in the “financial regulatory sandbox” and, if a positive outcome, conducted pursuant to the SEA.

Key provisions for STOs of NTD30 million or less include:

1. 1. Qualifications. The issuer must be a company limited by shares incorporated under the laws of Taiwan and not listed on the Taiwan Stock Exchange or TPEx, or traded on the Emerging Stock Market.
   2. Types that can be issued. Only profit-sharing or debt tokens without shareholders’ rights.
   3. Eligible investors and limits. Only professional investors are eligible; and where the professional investor is a natural person, the maximum subscription amount is NTD300,000 per STO.
   4. STO platform operator. Should obtain a securities dealer licence, have minimum paid-in capital of NTD100 million and provide an operation bond of NTD10 million.
   5. Total offering amount. Total amount of all STOs on a single platform should not exceed NTD200 million.
   6. Other requirements and restrictions include those regarding trading (secondary market), real-name basis, NTD only.

Notably, due to such relatively stringent restrictions under the STO regulations – such as the qualifications of the issuer, eligible investors and amount limits, as well as compliance costs – only one STO programme has been launched to date.

Anti-money laundering

Although STO activities are limited, there have been crypto platform/exchange operators providing services in relation to cryptocurrencies that are not security tokens. As long as no security tokens are involved, there are no laws or regulations specifically dealing with the trading of cryptocurrencies – so no licence is required for operating crypto platforms/exchanges.

However, the Money Laundering Control Act (AML Act), the main law governing anti-money laundering, enmeshes VASPs into Taiwan’s AML regulatory regime.

Pursuant to current FSC regulations under the AML Act, the scope of VASPs covers those engaging in:

1. 1. Exchange between virtual assets and new Taiwan dollars, foreign currencies or currencies issued
      by mainland China, Hong Kong
      or Macau;
   2. Exchange between virtual assets;
   3. Transfer of virtual assets;
   4. Custody and/or administration of virtual assets or providing instruments enabling control over virtual assets; and
   5. Participation in and provision of financial services related to the issuance or sale of virtual assets.

In 2024, the FSC introduced new rules under the AML Act requiring VASPs to register with the FSC before offering any virtual asset-related services such as operating exchanges, trading platforms, transfer services, custodial services or underwriting activities.

Failure to register may result in criminal penalties, including imprisonment for up to two years, fines of up to NTD5 million, or both.

In response, many existing VASPs have submitted applications, with the FSC expected to announce approvals no later than September 2025.

Additionally, the regulations impose several operational obligations on VASPs.

These include:

1. 1. establishing internal control systems and audit mechanisms;
   2. implementing know-your-customer (KYC) procedures;
   3. maintaining proper transaction records;
   4. conducting ongoing monitoring of client activities; and
   5. reporting both large transactions and suspicious activities to the authorities.

Latest developments

To lay the groundwork for future VASP regulation, the FSC has released guidelines addressing a wide range of issues, including:

1. 1. obligations on virtual asset issuers, such as publishing a white paper;
   2. review mechanisms for VASPs before listing or launching new virtual assets;
   3. requirements for segregating customer assets from a VASP’s own funds;
   4. ensuring transaction fairness and transparency;
   5. operational management standards, including cybersecurity and the management of hot and cold wallets;
   6. disclosure obligations;
   7. the establishment of internal controls and audit systems; and
   8. extension of certain compliance duties to offshore VASPs.

Building on this foundation, the FSC moved to tighten oversight further by drafting a dedicated law for VASPs, announced in March 2025.

The proposed legislation focuses on minimum capital thresholds, qualifications for VASP responsible persons and beneficiaries, and enhancing consumer protection.

Once enacted, this law would shift the current system from a basic registration framework (under the AML regime) to a full licensing regime, requiring VASPs to obtain regulatory approval before offering virtual asset services.

However, it remains uncertain if and when the draft legislation will successfully be passed through the Legislative Yuan (the congress) in Taiwan.

DeFi and NFTs

New applications of cryptocurrency and blockchain technology such as DeFi (decentralised finance) and NFTs (non-fungible tokens) have also been hotly discussed.

Although no official government view has been announced on the rise of DeFi, from a local perspective, its classification should be determined case by case, and laws such as those relating to banking, trusts and futures would need to be reviewed for checking and ensuring compliance with Taiwan law.

Market players might argue that under a DeFi structure, no centralised business operator should be held liable for any activities, illegal or not. But from a legal perspective, this should be more of a factual/evidential matter, meaning the possibility that any person who initiates (or subsequently plays a major role in) a DeFi project might still be considered the real “actor” with respect to potential legal consequences cannot be ruled out.

With respect to NFTs, discussion focuses on what an NFT holder actually owns or obtained – whether digital artworks, music works, collectibles, baseball/basketball cards, photo albums and such. In which case, classification of any NFT or its offering should also be examined on a case-by-case basis.

Although there might be various ways of structuring an NFT (such as defining the “underlying asset”), it is suggested that the rights and obligations of participating parties – namely issuers, platform operators, and/or service/technology providers – be clearly identified/stipulated in the terms and conditions, especially from the perspective of copyright.

Also, notwithstanding the nature of any NFT being non-fungible and unique, the applicability of financial law, such as securities regulations, cannot be completely ruled out either.

Finally, it is also unclear whether DeFi market players would fall within the scope of the above-mentioned AML-related regulations, creating uncertainty for future development of such emerging activities from a regulatory viewpoint.

LEE AND LI, ATTORNEYS-AT-LAW
8F, No 555, Sec 4, Zhongxiao E Rd
Taipei 110055, Taiwan, ROC
Tel: 886 2 2763 8000
Email: attorneys@leeandli.com
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