The Financial Supervisory Commission (FSC) of Taiwan recently enacted the "Money Laundering Control and Counter-Terrorist Financing Act for Virtual Currency Platforms and Trading Business Operators." This regulation, effective from July 1, formally brings virtual asset service providers under the scope of anti-money laundering (AML) oversight.
Under the new rules, to align with international standards set by the Financial Action Task Force (FATF) and local AML laws, the FSC is implementing a real-name trading system for virtual currency investments. Exchanges were given a one-year adjustment period to comply with these measures, which include implementing know-your-customer (KYC) procedures, record keeping, and suspicious activity reporting.
To help industry players understand these new requirements, the FSC held a public hearing in May, inviting eight major exchanges: Ace Digital Innovation, BitoPro, Maicoin, StarBit, Joyso, Statecraft, BitAsset, and Subo.
According to Lin Zhiji, Deputy Director of the FSC’s Banking Bureau, while virtual assets like Bitcoin are not legal tender nor financial products approved by the authorities, bringing virtual currency platforms under AML regulation is essential to mitigate associated risks.
How Virtual Currency Exchanges Are Adapting
Most exchanges have already begun adjusting their operations to comply with the new AML requirements.
For instance, BitoPro required its users to complete Level 2 real-name verification by June 30. Users who had already passed this level were asked to provide additional information, such as their international, household registration, or residence address, occupation, and source of funds.
BitoPro stated that accounts failing to complete verification or provide supplementary data would have functionalities like withdrawals, trading, and subscription services suspended. Open orders would also be canceled until verification was completed and approved.
Similarly, MAX Exchange (Maicoin) required new users and existing Level 1 users to provide and verify identity information starting in early June. New registrations are now limited to individuals over 20 years old who hold a Taiwanese ID, residence permit, or permanent residence card. Users who did not upload the required documents were downgraded to Level 0 on July 1, leaving them with access only to view market prices.
Subo Exchange announced that due to the need for extensive system optimization to meet the new requirements, it would suspend exchange services starting July 1, with no specified restart date. Users could still withdraw assets until July 31 but were unable to make deposits.
Joyso, a hybrid decentralized exchange, also published a notice stating that to comply with the new virtual currency AML laws, Consensus Tech would cease providing decentralized services—ETH JOYSO DEX and TRON JOYSO DEX—after June 30. The Joyso website no longer supports deposits, trades, or withdrawals. Users must now call smart contracts directly to withdraw funds, assuming all associated risks.
ACE Exchange noted that it had been preparing for these regulations since 2018, when it partnered with KPMG for a compliance report before its launch. ACE has long implemented real-name verification measures, including name screening and personal data identification. The exchange stated it collaborates with government agencies to monitor and report suspicious transactions, helping prevent fraud and money laundering.
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Global Context: US Steps Up AML Efforts for Crypto
The US Financial Crimes Enforcement Network (FinCEN), under the Department of the Treasury, has emphasized that combating money laundering is a current priority for the US government. FinCEN is coordinating with financial regulators and law enforcement agencies to introduce the first government-wide anti-money laundering and counter-terrorist financing (AML/CFT) policy, with implementation rules expected in the coming months.
According to FinCEN’s detailed document, one of the key priorities is preventing virtual currencies from being used for money laundering in cybercrime. While acknowledging that digital assets bring substantial innovation to the financial industry, FinCEN also recognizes that they have become a preferred medium for illicit transactions, making robust AML measures necessary.
Frequently Asked Questions
What is the real-name system for virtual currency trading?
The real-name system requires all virtual currency exchange users to verify their identities using official documents. This helps prevent anonymous transactions, reducing the risk of money laundering, fraud, and other illegal activities.
Which documents are required for verification?
Typically, users need to provide a government-issued ID, such as a national ID card or residence permit. Some exchanges may also request proof of address, occupation, and source of funds for higher verification levels.
What happens if I don’t complete the verification?
Accounts that fail to complete verification may have restrictions placed on their functionalities, such as inability to trade, withdraw funds, or access certain services. In some cases, accounts may be suspended until verification is completed.
Are all exchanges in Taiwan affected by this regulation?
Yes, all virtual currency platforms operating in Taiwan must comply with the new AML regulations. This includes implementing KYC procedures, monitoring transactions, and reporting suspicious activities to authorities.
How does this align with global regulations?
Taiwan’s move is consistent with international standards set by the FATF. Many countries, including the US, are implementing similar measures to regulate virtual assets and prevent their misuse for financial crimes.
Can I still use decentralized exchanges?
Decentralized exchanges operating in Taiwan must also comply with the new rules. Some may suspend services or adjust their operations to meet these requirements, potentially affecting user access and functionality.
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The implementation of Taiwan’s real-name system marks a significant step toward regulating the virtual currency market, enhancing transparency, and protecting investors. As global standards evolve, exchanges and users must stay informed and adapt to these changes to ensure compliant and secure participation in the digital asset ecosystem.