Cryptocurrency often carries a negative reputation, with terms like "high risk," "scams," "money laundering," and "illegal fundraising" frequently associated with it. However, some investors are intrigued by the potential for high returns and are eager to enter this emerging market. A common question arises: How does Taiwan regulate such a high-risk investment vehicle? This article summarizes the stance of Taiwan’s Financial Supervisory Commission (FSC) on cryptocurrency and explains key legal regulations governing its use.
Understanding Cryptocurrency: Commodity, Not Currency
Cryptocurrencies like Bitcoin and Ethereum are digital assets that function as mediums of exchange. Unlike government-issued fiat currencies, they rely on cryptographic principles to secure transactions. Their appeal lies in features such as decentralization, immutability, and pseudonymity.
As early as 2013, the FSC clarified that Bitcoin is not considered a currency but a highly speculative digital virtual commodity. In 2014, the FSC reinforced this position, prohibiting financial institutions from accepting or exchanging Bitcoin. Banks were also barred from offering Bitcoin-related services via ATMs.
The term "cryptocurrency" can be misleading, as it implies a form of money. The FSC has consistently emphasized that these assets are not legal tender and are subject to extreme price volatility. Investors are urged to exercise caution and thoroughly evaluate risks before investing.
Legal Risks: Criminal Liability and Fraud
During the Initial Coin Offering (ICO) boom of 2017, the FSC issued warnings about the high risks associated with these fundraisers. An ICO involves a company issuing digital tokens to investors in exchange for capital, often promising future benefits or returns.
The regulatory treatment of ICOs depends on their specific structure. If a token meets the definition of a security under the Securities and Exchange Act, it must comply with relevant regulations. Issuing securities without FSC approval can result in severe penalties, including imprisonment for up to five years and fines of up to NT$15 million.
Beyond securities laws, fraudulent activities involving cryptocurrency—such as promoting investments with false information or unrealistic returns—may lead to charges under the Criminal Code for fraud or the Banking Act for illegal fundraising. Existing laws already cover these offenses, meaning no new legislation is required to prosecute cryptocurrency-related crimes.
Anti-Money Laundering Measures
Money laundering prevention is a global priority, and the cryptocurrency sector is no exception. In 2015, the Financial Action Task Force (FATF) issued guidelines applying anti-money laundering (AML) rules to virtual assets and service providers.
Taiwan amended its Anti-Money Laundering Act in 2018 to include cryptocurrency platforms and trading businesses. By 2021, detailed regulations were enacted, requiring crypto service providers to verify customer identities, refuse suspicious transactions, and report potential money laundering activities to the Ministry of Justice.
These measures, though sometimes seen as cumbersome, are essential for preventing illicit activities. The FSC now mandates that crypto businesses declare compliance with AML regulations before operating. Non-compliance can result in fines of up to NT$10 million.
Frequently Asked Questions
What is the legal status of cryptocurrency in Taiwan?
Cryptocurrency is classified as a virtual commodity, not legal tender. The FSC prohibits financial institutions from handling cryptocurrency transactions directly.
Can I launch an ICO in Taiwan?
It depends. If the token qualifies as a security, you must obtain FSC approval. Unauthorized offerings may lead to criminal penalties under the Securities and Exchange Act.
How are cryptocurrency scams handled?
Fraudulent schemes involving crypto are prosecuted under existing laws, including the Criminal Code and the Banking Act. Investors should be wary of promises that seem too good to be true.
What AML rules apply to crypto exchanges?
Exchanges must follow strict customer due diligence procedures, monitor transactions, and report suspicious activities. The FSC conducts compliance audits and imposes fines for violations.
Are newer concepts like DeFi or NFTs regulated?
Currently, there are no specific regulations for DeFi, GameFi, or NFTs. The FSC is monitoring market developments and may issue guidelines as these areas evolve.
Where can I learn more about secure trading practices?
👉 Explore essential security guidelines for crypto investors
Conclusion
Taiwan’s regulatory approach to cryptocurrency focuses on preventing fraud, money laundering, and unauthorized securities offerings. While existing laws provide a framework for addressing these issues, newer investment forms like DeFi and NFTs remain largely unregulated. As the market evolves, investors should stay informed and cautious. Regulatory clarity is expected to improve as authorities gain more experience and issue further guidance.