May 2026
Taiwan Executive Yuan Approves Draft “Virtual Asset Service Act”: Key Highlights of Stablecoin Regulation
On April 2, 2026, the Executive Yuan approved the draft “Virtual Asset Service Act” (the “Executive Yuan Draft”), which will subsequently be submitted to the Legislative Yuan for deliberation.
The Executive Yuan Draft expressly defines virtual asset businesses and stablecoins, establishes licensing and supervisory regimes for virtual asset service providers (“VASPs”) and stablecoin issuers, and imposes criminal or administrative liabilities for violations. This article briefly outlines the key provisions [1] relating to stablecoins under the Executive Yuan Draft.
I. Definition of Stablecoins
Article 3, Paragraph 6 of the Executive Yuan Draft defines a stablecoin as “a virtual asset that is linked to the value of one or more fiat currencies in order to maintain a stable value.” The term “linked to value” refers to a fixed one-to-one exchange ratio with fiat currency. In other words, the definition of stablecoins under the Executive Yuan Draft does not encompass algorithmic stablecoins [2] or stablecoins linked to assets other than fiat currencies.
II. Licensing Requirement for Stablecoin Issuance
The issuance of stablecoins involves the raising of funds from the public, custody of customer assets, and the repayment capability of stablecoin issuers, all of which necessitate enhanced regulatory oversight. Accordingly, Article 34 of the Executive Yuan Draft expressly provides that the issuance of stablecoins requires prior approval from the competent authority. Furthermore, before granting such approval, the competent authority must consult with and obtain consent from the Central Bank of Taiwan.
III. Mechanisms for the Protection of Stablecoin Holders
1. Stablecoin Value Stabilization Mechanism
To prevent stablecoins from becoming de-pegged from fiat currencies and to ensure that they function as stable stores of value, the Executive Yuan Draft provides that, where a stablecoin holder requests redemption, the issuer may not refuse such redemption in principle and must redeem the stablecoins at par value [3] . (Article 37, Paragraphs 1 and 3 of the Executive Yuan Draft)
In addition, stablecoin issuers are required to establish and maintain full reserve assets deposited with domestic financial institutions. Such reserve assets must be segregated from the issuer’s proprietary assets and be subject to periodic audits and examinations. (Article 36, Paragraph 1 of the Executive Yuan Draft)
2. Information Disclosure Obligations
Recognizing that public disclosure of information relating to stablecoin issuance may enhance market confidence in stablecoins, Article 41 of the Executive Yuan Draft requires stablecoin issuers to disclose the following information to the public, including but not limited to:
(1) issuance disclosure documents;
(2) reserve asset management policies and stablecoin redemption policies;
(3) the composition and value of reserve assets;
(4) and the results of periodic audits conducted pursuant to Article 36, Paragraph 1
IV. Prohibition on Interest Payments
Given that stablecoins are intended primarily for payment purposes and differ from deposit-like financial assets, Paragraph 2 of the same article provides that stablecoin issuers may not pay “any form of interest or yield” on the stablecoins they issue.
In summary, the Executive Yuan Draft of the Virtual Asset Service Act has preliminarily established a regulatory framework for stablecoins and reflects the regulators’ supervisory approach toward stablecoins. Nevertheless, because the regulation of stablecoins, and the Virtual Asset Service Act as a whole, may have a significant impact on Taiwan’s virtual asset industry, legislators, regulators, and industry participants continue to engage in discussions regarding various provisions of the draft Act.
Accordingly, it remains to be seen whether the relevant regulatory framework and the intensity of supervision will be further adjusted during the Legislative Yuan’s deliberation process, and how Taiwan will ultimately strike a balance between financial innovation and financial stability.
[1] Please refer to the General Explanation of the Draft Virtual Asset Service Act https://www.ey.gov.tw/File/18152F58A4638709?A=C
[2] Stablecoins that maintain their value stability through algorithmic mechanisms.
[3] Stablecoin redemption refers to the process by which a holder seeking redemption submits the stablecoins it holds to the issuing institution, whereupon the issuing institution instructs a bank or custodial institution to remit an equivalent amount of fiat currency to the redeeming holder, while the corresponding stablecoins are simultaneously burned.
The Executive Yuan Draft expressly defines virtual asset businesses and stablecoins, establishes licensing and supervisory regimes for virtual asset service providers (“VASPs”) and stablecoin issuers, and imposes criminal or administrative liabilities for violations. This article briefly outlines the key provisions [1] relating to stablecoins under the Executive Yuan Draft.
I. Definition of Stablecoins
Article 3, Paragraph 6 of the Executive Yuan Draft defines a stablecoin as “a virtual asset that is linked to the value of one or more fiat currencies in order to maintain a stable value.” The term “linked to value” refers to a fixed one-to-one exchange ratio with fiat currency. In other words, the definition of stablecoins under the Executive Yuan Draft does not encompass algorithmic stablecoins [2] or stablecoins linked to assets other than fiat currencies.
II. Licensing Requirement for Stablecoin Issuance
The issuance of stablecoins involves the raising of funds from the public, custody of customer assets, and the repayment capability of stablecoin issuers, all of which necessitate enhanced regulatory oversight. Accordingly, Article 34 of the Executive Yuan Draft expressly provides that the issuance of stablecoins requires prior approval from the competent authority. Furthermore, before granting such approval, the competent authority must consult with and obtain consent from the Central Bank of Taiwan.
III. Mechanisms for the Protection of Stablecoin Holders
1. Stablecoin Value Stabilization Mechanism
To prevent stablecoins from becoming de-pegged from fiat currencies and to ensure that they function as stable stores of value, the Executive Yuan Draft provides that, where a stablecoin holder requests redemption, the issuer may not refuse such redemption in principle and must redeem the stablecoins at par value [3] . (Article 37, Paragraphs 1 and 3 of the Executive Yuan Draft)
In addition, stablecoin issuers are required to establish and maintain full reserve assets deposited with domestic financial institutions. Such reserve assets must be segregated from the issuer’s proprietary assets and be subject to periodic audits and examinations. (Article 36, Paragraph 1 of the Executive Yuan Draft)
2. Information Disclosure Obligations
Recognizing that public disclosure of information relating to stablecoin issuance may enhance market confidence in stablecoins, Article 41 of the Executive Yuan Draft requires stablecoin issuers to disclose the following information to the public, including but not limited to:
(1) issuance disclosure documents;
(2) reserve asset management policies and stablecoin redemption policies;
(3) the composition and value of reserve assets;
(4) and the results of periodic audits conducted pursuant to Article 36, Paragraph 1
IV. Prohibition on Interest Payments
Given that stablecoins are intended primarily for payment purposes and differ from deposit-like financial assets, Paragraph 2 of the same article provides that stablecoin issuers may not pay “any form of interest or yield” on the stablecoins they issue.
In summary, the Executive Yuan Draft of the Virtual Asset Service Act has preliminarily established a regulatory framework for stablecoins and reflects the regulators’ supervisory approach toward stablecoins. Nevertheless, because the regulation of stablecoins, and the Virtual Asset Service Act as a whole, may have a significant impact on Taiwan’s virtual asset industry, legislators, regulators, and industry participants continue to engage in discussions regarding various provisions of the draft Act.
Accordingly, it remains to be seen whether the relevant regulatory framework and the intensity of supervision will be further adjusted during the Legislative Yuan’s deliberation process, and how Taiwan will ultimately strike a balance between financial innovation and financial stability.
[1] Please refer to the General Explanation of the Draft Virtual Asset Service Act https://www.ey.gov.tw/File/18152F58A4638709?A=C
[2] Stablecoins that maintain their value stability through algorithmic mechanisms.
[3] Stablecoin redemption refers to the process by which a holder seeking redemption submits the stablecoins it holds to the issuing institution, whereupon the issuing institution instructs a bank or custodial institution to remit an equivalent amount of fiat currency to the redeeming holder, while the corresponding stablecoins are simultaneously burned.
