TBW》Calling the blockchain! Chiang Wan'an reveals the vision of Taipei Smart City, encryption regulatory progress?

TBW 2024》蔣萬安：台北將成為AI＋Block鏈智慧城市

2024 Taipei Blockchain Week (TBW 2024) opened today (12/12), connecting Taiwan's blockchain with the world as a bridge from the first edition 'Bridge' to the second edition 'Scale' that became a conference with 5,000 attendees. This year's focus is on blockchain application implementation.

Taipei Mayor, Wan-An Chiang, also gave a speech at the annual Taiwan Blockchain event, emphasizing the Taipei City government's supportive attitude towards emerging technologies.

The Taipei City Government is actively promoting a 5-year, 10 billion budget for smart city innovation, encouraging municipal government agencies to adopt AI technology, promote cross-departmental collaboration, and create more smart city application cases.

Chiang Wan-an said that Taipei's vision is to become a global leader in AI and Blockchain technology. He hopes to provide a platform for young people to unleash their potential and accelerate Taiwan's development as an innovation hub in Asia.

At the same time, the city government is committed to digital transformation, hoping to cooperate with the industry to make Taipei a open and innovative technology center.

Source: Cryptocity Photography Taipei Blockchain Week 2024. Taipei Mayor Jiang Wan-an shares the vision of an AI+Blockchain smart city.

Cai Yuling explains the panorama of virtual asset regulation in Taiwan

At the same event, Yuling Cai, Honorary Chairman of the Taiwan FinTech Association, comprehensively analyzed the regulatory blueprint for Virtual Asset Service Providers (VASPs) in Taiwan. As an advisor to the Taiwan Virtual Asset Association preparatory team, she elaborated on the latest developments and strategies for virtual asset regulation in Taiwan.

Cai Yuling pointed out that Taiwan has adopted a phased approach to regulatory strategy, aiming to protect the rights and interests of investors while creating a favorable development environment for the virtual asset industry. This strategy can be summarized in the following key stages:

Phase one: Establish Anti-Money Laundering (AML) measures

In November this year, Taiwan officially passed an amendment to the anti-money laundering law, bringing VASPs and third-party payments under regulation, and listing detailed penalties, which is clearer compared to the previous process of compliance with the anti-money laundering law declaration.

Phase two: Industry cooperation and self-regulation norms

Tsai Yuling emphasized that the key to the second phase is to bring industry participants together to jointly formulate self-regulatory norms. The Taiwan Virtual Currency Association plays a crucial role in this phase, organizing industry representatives to discuss and establish industry standards.

Taiwan's virtual asset self-regulation norms were publicly released at the end of November, with detailed specifications for investor protection, asset security, internal governance, and information transparency. For KOLs and the media, there are also stricter requirements for content regulation and risk disclosure.

Cai Yuling said that self-regulation is not only the regulatory language formulated by the industry, but also approved by the government, so it can eliminate government concerns.

Further reading: Taiwan Virtual Asset Self-Regulatory Guidelines Cheat Sheet! See the Eight Major Impacts on Operators and KOLs at Once

Phase 3: Implementation of Operator Registration System

Taiwan's latest regulations require that Virtual Asset Service Providers (VASPs, Note) must be formally registered when operating in Taiwan. Operators who are not legally registered may face a maximum of two years in prison and a fine of 5 million. The purpose of this stage is to ensure that all service providers are included in the regulatory framework, and to increase the transparency and reliability of the overall industry.

Meanwhile, the Financial Supervisory Commission of Taiwan has continued to conduct AML inspections on VASPs. This year, it has already penalized platforms such as MaiCoin, BitoEX, Rybit, and the flagship exchange ACE, showing that regulation is tightening.

Note: VASP includes exchanges, trading platforms, custodians, asset transferors, and underwriters.

Further reading: Do not test the law with your own body! The registration system for Taiwan's VASPs is launched, and the heaviest penalty for unregistered virtual asset services is up to 2 years.

Phase Four: Establishing the Regulatory Framework

At this stage, the Financial Supervisory Commission of Taiwan begins to draft regulations related to virtual assets, laying the foundation for future comprehensive supervision, with a focus on establishing basic compliance requirements and regulatory principles.

"Crypto City" previously reported that Financial Supervisory Commission Chairman Kung-Lung Peng revealed that the special law for virtual asset management is expected to be submitted to the Executive Yuan in June 2025, and the legislative process will begin.

What are the guiding principles for Virtual Asset Service Providers (VASPs)?

Cai Yuling elaborated on the specific requirements for VASPs. First of all, all VASPs must join the Taiwan Virtual Currency Association, which helps establish industry self-discipline rules and a comprehensive information security management system to protect customer data and asset security.

VASPs also need to set up trust accounts to ensure the safe isolation of customer funds, and establish detailed customer protection policies, including complaint handling mechanisms and asset tracking procedures, and implement strict Know Your Customer (KYC) processes to prevent money laundering and illegal transactions.

Taiwan's virtual asset custody business will be piloted next year

In addition to regulatory regulations, Tsai Yuling also mentioned that from January to April 2025, the FSC will start trial operation of the 'Virtual Asset Custody Business'. The custodians are not limited to VASPs. Financial institutions (fintech companies) can also apply for registration. And mention some regulatory focus:

The custodial service provider needs to register based on the degree of asset control differentiation.

A comprehensive asset reconciliation mechanism must be established.

Clear customer asset protection policies need to be established.

Image source: Cryptocurrency City Photography Taipei Block Chain Week 2024> Cai Yuling took the stage to explain the trial plan of Taiwan's virtual asset custody business in detail

Cryptocurrency scams are rampant, how does Taiwan prevent them?

The problem of financial fraud on the Internet in Taiwan is becoming increasingly serious, causing headaches for the people and the government. Data shows that out of 37,823 fraud cases in 2023, 30% are related to cryptocurrency fraud, with a total financial loss of up to 5.3 billion New Taiwan dollars.

To combat fraud, Tsai Yuling pointed out that Taiwan has established a multi-level protection mechanism:

Suspicious Account Monitoring: including the establishment of a cross-platform suspicious account notification mechanism for quick freezing and tracking of suspicious transactions.

Asset Tracking: Establish an asset transfer notification system to collaboratively track abnormal transactions across platforms

Investor Protection: In certain circumstances, investors can request the platform to return stolen assets and establish an investor complaint and compensation mechanism.

Image source: Cryptocurrency City Photography Taipei Blockchain Week 2024》Cai Yuling takes the stage to explain the current status of cryptocurrency regulation in Taiwan

The Future of Virtual Asset Regulation in Taiwan

Cai Yuling is optimistic about the future of Taiwan's virtual asset industry. She emphasizes that the current regulatory framework is an evolving process, and the government and the industry will continue to cooperate to continuously improve the regulatory system.

Taiwan is trying to find a balance between risk management and industry innovation, striving to establish a regulatory environment that can protect investors and encourage technological innovation.

Through a phased and collaborative regulatory approach, Taiwan hopes to set a benchmark in the global virtual asset regulatory field, demonstrating regulatory wisdom that combines openness and prudence.

The TBW》mentions Block chain! Chiang Wan-an reveals the vision of Taipei Smart City, progress of encrypted regulation? This article was first published in 'Crypto City'