Hearing next week! The draft Virtual Asset Service Law has 12 versions, and the Financial Supervisory Commission will promote encryption custody guidelines.

The Legislative Yuan will review up to 12 versions of the draft “Virtual Asset Services Act” next week, aiming to complete the third reading within this session. At the same time, the Financial Supervisory Commission is expected to roll out practical guidelines for banks’ virtual asset custody at the end of September at the latest, in order to strengthen risk control.

The Legislative Yuan will begin reviewing the Virtual Asset Services Act draft next week

Next week, the Legislative Yuan will review the draft “Virtual Asset Services Act” that concerns participants in Taiwan’s crypto community, article by article. There are already as many as 12 versions of the drafts under review. The session will focus on whether to regulate derivative financial products, as well as core issues such as fraud prevention and anti-money laundering. Kuomintang convener Li Yanshou said the goal is to push to complete the third reading within this session.

Meanwhile, in response to the gradually expanding virtual asset market, the Financial Supervisory Commission also expects to introduce practical guidelines for banks’ custody of cryptocurrencies this year, which will serve as important principles and a risk-control basis for domestic banks handling virtual asset custody business.

Up to 12 versions of the Virtual Asset Services Act draft

According to information from the Legislative Yuan’s legislative information website, there are currently 12 versions of the draft “Virtual Asset Services Act,” covering proposals from administrative agencies and across-the-spectrum party caucuses. Each version’s details are summarized below in the table:

| Proposing agency / political party | Representative proposer / unit | | --- | --- | | Administrative agency | Executive Yuan | | Taiwan People’s Party | Taiwan People’s Party caucus | | Democratic Progressive Party | Zhong Jiabin, Guo Guowen, Lin Yijin, Lai Huiyuan, Lin Chuyin | | Kuomintang | Li Baiyi, Lai Shibao, Li Yanshou, Ge Rujun, Lin Siming |

Among them, the version proposed by the Executive Yuan has been compiled into a “cheat sheet” for readers’ reference under the title Cryptocurrency City.

Different focal points among draft versions on whether virtual assets need to be regulated

According to United Daily News, people holding cryptocurrencies in Taiwan account for about 5% to 10% of the national population, with more than 1 million accounts opened. After the collapse of the FTX exchange in 2022 led to losses for Taiwanese investors, regulatory gaps have become more apparent. Kuomintang legislator Lin Siming believes that virtual assets and stablecoins have the characteristics of strategic goods with liquidity resilience, increasing the need for regulation.

• Related report: “FTX Collapse One Year On: The Wounds and Pain That Can’t Be Erased—How Can the Crypto Community Rise Again?”

On the regulatory direction, analysts from the Legislative Yuan noted that at present, only the Taiwan People’s Party caucus’s draft insists on including regulations governing derivative financial products, while most other legislators agree to adopt a gradual approach—first seeking stability and then improvement.

Regarding fraud prevention and anti-money-laundering measures, Democratic Progressive Party legislator Zhong Jiabin proposed adding a transaction monitoring mechanism for stablecoin issuers and suggested establishing a safe harbor provision, to prevent operators from refusing to block suspicious funds out of fear of litigation. Kuomintang legislator Ge Rujun, meanwhile, called for supporting the Financial Supervisory Commission to establish a dedicated unit and expand personnel to meet supervisory needs.

In addition, according to Commercial Times, the Central Bank reminded that stablecoins are rapidly expanding and carry potential bank-run (redemption) risks; if large-scale redemptions occur, it could affect overall financial stability. Going forward, it will continue to communicate with the Financial Supervisory Commission regarding the drafting of subsidiary regulations.

Financial Supervisory Commission to roll out virtual asset custody practical guidelines as early as September

In addition to reviewing the special act, domestic banks are also accelerating their efforts regarding virtual asset custody services.

According to Economic Daily News, the Banking Bureau of the Financial Supervisory Commission disclosed that it has already asked the Bankers Association to study and develop “Practical Guidelines for Virtual Asset Custody,” which are expected to be released at the end of September to the beginning of October this year at the latest. Since virtual asset custody involves private key management, cybersecurity, and operational risks, these guidelines will become the risk-control basis for banks to handle related businesses.

Currently, the Financial Supervisory Commission has approved five banks to conduct pilot programs for virtual asset custody business, including Federal Bank, CTBC Bank, KGI Bank, Cathay United Bank, and Taishin Bank. Each bank is continuing to test the scope of its pilot program:

• Federal Bank: Began a small-scale pilot in September of last year, and is now approved to extend the program until March 2027.
• CTBC: Focuses primarily on custody of assets for specific corporate customers.
• KGI Bank: Cooperates with five virtual asset service providers, with a pilot program limit of up to the equivalent of USD 20 million.
• Cathay United Bank: Has launched a six-month invitation-only pilot.
• Taishin Bank: Is still building its system; after the launch, the pilot period is also expected to be six months.

However, the practical guidelines the Financial Supervisory Commission plans to release in the future will go beyond case-by-case pilots; they will follow broad principles, strengthen banks’ risk control, and help banks establish custody frameworks. After the special act is passed in the future, any banks that wish to continue offering such services will still need to apply to the Financial Supervisory Commission in accordance with the new regulations.

Further reading:
Taiwan’s first! KGI Bank approved to pilot cryptocurrency custody—what business opportunities will it bring?

Cathay United Bank can custody cryptocurrencies! Becomes the 4th bank to pilot, and is also laying the groundwork for tokenized bonds

CITIC and Federal are also approved to enter! How will banks custody cryptocurrencies, and what are the key points of the pilot?