The Legislative Yuan passed the Virtual Asset Service Act in its third and final reading, sending the legislation to President Lai Ching-te, who is expected to sign the bill into law within the next 10 days. Once enacted, the framework will place crypto exchanges, custodians, and stablecoin issuers under the supervision of Taiwan's Financial Supervisory Commission (FSC).
The legislation marks one of Taiwan's biggest regulatory shifts for the digital asset industry, replacing its previous anti-money laundering-focused oversight with a comprehensive licensing regime.
Crypto Firms Must Obtain FSC Licenses
Under the new law, all virtual asset service providers (VASPs) must receive approval from the Financial Supervisory Commission before operating in Taiwan.
The framework introduces stricter requirements covering cybersecurity, client asset segregation, internal controls, and operational risk management.
Crypto businesses that have already completed Taiwan's existing anti-money laundering (AML) registration process will be given a transition period. They will have 12 months to submit licensing applications and up to 21 months to obtain full regulatory approval and any additional required licenses.
The new system aims to bring all crypto service providers under a unified regulatory framework while improving consumer protection and market transparency.
Stablecoin Issuers Face Strict Oversight
The legislation also creates a dedicated regulatory framework for stablecoins.
Companies seeking to issue or manage stablecoins must receive approval from both the Financial Supervisory Commission and Taiwan's central bank before launching their products.
In addition, every stablecoin must maintain full reserve backing, ensuring that issued tokens remain fully collateralized.
The dual-approval process reflects Taiwan's cautious approach toward digital currencies, balancing innovation with financial stability.
Violations Carry Severe Criminal Penalties
One of the most notable aspects of the new legislation is its introduction of criminal penalties for non-compliance.
Individuals or companies operating unauthorized crypto businesses or issuing stablecoins without approval could face up to seven years in prison, along with fines reaching NT$100 million (approximately $3.14 million).
Meanwhile, offenses involving fraud, market manipulation, or other serious crypto-related crimes carry even harsher consequences, including prison sentences ranging from three to ten years and financial penalties of up to NT$200 million (approximately $6.28 million).
The tougher enforcement measures are intended to strengthen investor confidence while discouraging illegal activity within Taiwan's digital asset sector.
Traditional Banks May Soon Enter the Crypto Market
Legal experts believe the new framework will fundamentally reshape Taiwan's crypto industry.
Kevin Cheng, founder of crypto consultancy Harmony Governance Advisors, said businesses that previously operated within regulatory gray areas will no longer be able to rely on legal uncertainty.
The legislation could therefore increase competition as banks and established financial institutions gain a clearer legal pathway into the digital asset market.
Industry Prepares for Transition
The Taiwan VASP Association is expected to work closely with regulators as implementation begins.
According to Titan Cheng, chairman of the association and founder of crypto exchange BitoGroup, the organization will assist authorities in drafting detailed licensing rules covering operations, governance, personnel management, and compliance standards.
The association also plans to help existing crypto companies navigate the transition period while minimizing disruption across the industry.
With the passage of the Virtual Asset Service Act, Taiwan joins a growing list of jurisdictions introducing comprehensive crypto legislation. The new framework provides long-awaited legal certainty while opening the door for broader institutional participation and strengthening oversight of one of Asia's fastest-growing digital asset markets.
