Taiwan's first crypto-specific law "Virtual Asset Service Act" passes third reading: VASP full licensing regime, stablecoin triple threshold, fraud up to 10 years in prison.

Taiwan's Legislative Yuan passed the first cryptocurrency-specific law, the "Virtual Asset Service Act," on June 30, with VASPs fully subject to a licensing system, stablecoin issuance requiring consultation with the central bank and full reserve assets, and fraud or market manipulation carrying a maximum sentence of 10 years in prison and a fine of NT$200 million.
(Previous report: Taiwan's Executive Yuan releases full解读 of the "Virtual Asset Service Act" draft! New stablecoin-related clauses added, fraud and manipulation carry up to 10 years in prison)
(Background supplement: FSC's Peng Jinlong: Taiwan's stablecoins will first be issued by "financial institutions," with the earliest implementation in June 2026)

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• Full VASP Licensing System: No operations without registration
• Triple Threshold for Stablecoins: License, Central Bank Approval, Full Reserve Assets
• Penalty Severity: Fraud and manipulation up to 10 years, fine of NT$200 million
• Aligning with International MiCA, South Korea, Japan: Taiwan fills the final piece
• Stablecoins initially limited to financial institutions: earliest implementation in second half of 2026

Taiwan's crypto industry officially leaves the regulatory gray zone. The Legislative Yuan passed the "Virtual Asset Service Act" on June 30, Taiwan's first comprehensive law targeting the virtual asset industry, covering the VASP licensing system, stablecoin issuance thresholds, holder protection mechanisms, and severe penalties, marking the official entry of Taiwan's crypto industry into the "licensed era."

Full VASP Licensing System: No operations without registration

The core of the new law is to bring virtual asset service providers (VASPs) under the licensing system of the competent authority, the Financial Supervisory Commission (FSC). Operators must apply for licenses based on their business types; no virtual asset services may be operated without a license. Starting, suspending, resuming, ceasing, dissolving, or even changing the scope of business must all be pre-approved by the FSC.

The regulations also require VASPs to establish internal control and audit systems, strengthen information and communication system security management, and formulate business continuity policies, elevating the previous "post-event management" model of anti-money laundering registration to a "pre-event review" model.

For existing operators who had completed anti-money laundering registration before the implementation of this law, a transitional period is provided: they must submit a license application within 12 months of implementation and complete the acquisition of the license and certificate within 21 months; otherwise, they will be deemed to be operating without a license.

Triple Threshold for Stablecoins: License, Central Bank Approval, Full Reserve Assets

The stablecoin chapter is the most industry-concerned part of this legislation. The law defines stablecoins as "virtual assets that represent a linkage in value to one or more fiat currencies to maintain their value stability." Issuance requires applying for a license from the FSC, and prior to licensing, the Central Bank must be consulted for approval, effectively setting up a dual regulatory checkpoint.

In terms of asset management, issuers must establish and maintain full reserve assets, deposited in domestic financial institutions, and must be completely segregated from the issuer's own property; except for statutory reserves, the remaining reserve assets must be fully entrusted to a financial institution for custody and regularly audited. Additionally, issuers are explicitly prohibited from paying any form of interest or returns on stablecoins, cutting off potential arbitrage channels similar to deposit interest models.

Regarding holder protection, the law stipulates that non-stablecoin holders cannot exercise any rights over the reserve assets; in the event of the issuer's bankruptcy, the reserve assets are not part of the bankruptcy estate, and holders have priority in claiming repayment from those assets, effectively creating a firewall for user funds.

Penalty Severity: Fraud and manipulation up to 10 years, fine of NT$200 million

The penalties in this law are divided into two tiers. Operating VASP businesses or issuing stablecoins without a license carries a sentence of up to 7 years in prison and a fine of up to NT$100 million. For fraud or market manipulation, including directly or indirectly influencing transaction prices or supply and demand, the penalty is increased to 3 to 10 years in prison and a fine of NT$10 million to NT$200 million, with sentencing severity comparable to general financial crime standards, demonstrating the authorities' determination to combat market misconduct.

Aligning with International MiCA, South Korea, Japan: Taiwan fills the final piece

The European Union's Markets in Crypto-Assets (MiCA) Regulation, South Korea's Virtual Asset User Protection Act, and Japan's revised Payment Services Act have all taken effect, bringing VASPs and stablecoins under legal frameworks. Taiwan previously operated under an anti-money laundering registration framework, long seen by outsiders as a regulatory gap. The passage of the "Virtual Asset Service Act" officially fills the final piece of the puzzle for Taiwan to align with major international markets.

A concurrent resolution by the Legislative Yuan also requires the FSC to submit, within 1 year of the law's passage, a plan to open virtual asset businesses to offer "derivative virtual asset product services," reserving policy space for the legalization of derivatives such as futures and options.

Stablecoins initially limited to financial institutions: earliest implementation in second half of 2026

Although the regulations clearly allow for the issuance of stablecoins domestically, FSC Chairman Peng Jinlong previously revealed that stablecoins will initially be limited to issuance by financial institutions first, gradually opening to non-financial participants once market mechanisms mature, with official implementation expected no earlier than the second half of 2026.

For crypto industry players, the passage of the "Virtual Asset Service Act" means higher compliance costs but also brings clearer legal certainty. Taiwan's crypto industry now has a complete regulatory framework. Whether the industry ecosystem can attract institutional funds and accelerate the entry of overseas exchanges into the Taiwan market in the "licensed era" will be the biggest observation indicator during the 12- to 21-month transition period.