July 2026
Taiwan Passes the Virtual Asset Service Act: Transitioning from an AML Registration Regime to a Licensing Regime
I. Introduction
In recent years, the financial applications of virtual assets have become increasingly widespread, accompanied by the continued expansion of related services. Accordingly, Taiwan’s regulatory focus has evolved beyond anti-money laundering (“AML”) to encompass the sound operation of service providers, the protection of customer assets, and the maintenance of a fair and transparent trading environment.
On June 30, 2026, Taiwan’s Legislative Yuan passed the Virtual Asset Service Act (the “Act”) on its third reading, and the Act was promulgated by the President on July 22 of the same year. The passage of the Act not only marks the transition of virtual asset service provider (“VASP”) regulation from a registration regime to a licensing regime, but also establishes a legal foundation for financial institutions’ participation in virtual asset businesses, stablecoin issuance, customer asset protection, and market order. This article outlines the key provisions of the Act and briefly discusses the direction of virtual asset regulation in Taiwan.
II. Overview of the Act’s Key Provisions
1. Transition from a Registration Regime to a Licensing Regime
Article 6 of the Act expressly defines the regulated categories of virtual asset services, including virtual asset exchange services, virtual asset trading platform services, virtual asset transfer services, virtual asset custody services, virtual asset underwriting services, virtual asset lending services, and other virtual asset services.
VASPs must obtain approval and a license from the competent authority before engaging in such virtual asset businesses (Article 7 of the Act). To facilitate the transition to the new regime, VASPs that have completed AML registration must apply to the competent authority for approval within twelve (12) months after the Act takes effect and obtain a license within twenty-one (21) months after the Act takes effect. Where necessary, the latter period may be extended by three (3) months (Article 55 of the Act).
2. Financial Institutions Permitted to Concurrently Engage in Virtual Asset Businesses
Under the Act, financial institutions may, with the approval of the competent authority, concurrently engage in virtual asset businesses and thereby qualify as “virtual asset service providers” as defined under the Act (Article 7, Paragraph 4 of the Act). This provision establishes a licensing pathway for traditional financial institutions seeking to enter the virtual asset sector.
3. Stablecoin Regulations
The Act’s stablecoin regulatory framework centers on three key requirements: licensed issuance, full reserve backing, and redemption at par value.
To issue stablecoins in Taiwan, an issuer must be a company limited by shares, maintain the minimum paid-in capital prescribed by the competent authority, obtain approval from the Financial Supervisory Commission, and secure the consent of the Central Bank (Article 34 of the Act).
To ensure that stablecoin holders are able to redeem their stablecoins, an issuer must establish and continuously maintain reserve assets sufficient to fully back the stablecoins in circulation. Such reserve assets must be deposited with domestic financial institutions, segregated from the issuer’s own assets, and subject to periodic audits. Except under circumstances prescribed by law, the issuer may not use or otherwise dispose of the reserve assets at its discretion (Article 36 of the Act).
The issuer is also required to issue and redeem stablecoins at par value. Unless otherwise provided by law or under special circumstances prescribed by the competent authority, the issuer may not refuse a stablecoin holder’s redemption request. In addition, the issuer may not pay any form of interest or return on stablecoins (Article 37 of the Act).
Furthermore, if the issuer becomes bankrupt, the reserve assets described above will not form part of its bankruptcy estate, and stablecoin holders will have a preferential right to satisfaction from such assets. These safeguards are intended to reinforce the issuer’s redemption commitment and protect the rights and interests of stablecoin holders (Article 38 of the Act).
4. Investor Protection Provisions
For purposes of investor protection, the Act’s safeguards may be considered from the perspectives of asset protection and market order.
When providing services, VASPs must adhere to the principles of fairness, reasonableness and good faith, and must fulfil their duties of care as a prudent manager and their fiduciary duties (Article 16 of the Act). They are also required to maintain the confidentiality of customer and transaction information (Article 17 of the Act).
With respect to asset protection, customer assets must be segregated from the VASP’s own assets and may not be used or otherwise disposed of except in accordance with customer instructions or under circumstances prescribed by law. If the VASP becomes bankrupt, customer assets will not form part of its bankruptcy estate (Article 18 of the Act). Fiat currency retained on behalf of customers must be placed in trust or fully guaranteed by a bank. As a general rule, a VASP may not refuse a customer’s request to withdraw or transfer assets (Articles 19 and 20 of the Act).
To maintain market order, the Act also protects customer interests and promotes the sound operation of virtual asset markets through requirements concerning the disclosure of financial and business information, offering documents, reviews of the listing and delisting of virtual assets, mechanisms to prevent unfair trading practices, periodic reconciliation of assets under custody, and audits by certified public accountants. The Act further expressly prohibits false statements, fraud, or concealment involving material information, as well as manipulative conduct intended to affect prices or create a misleading appearance of active trading. Violators may be subject to imprisonment for a term of three (3) to ten (10) years and a criminal fine of between NT$10 million and NT$200 million. The Act also grants bona fide traders the right to claim damages (Articles 47 and 42 of the Act).
III. Conclusion
The passage of the Act marks the beginning of a new phase in Taiwan’s regulation of virtual assets. Notably, when passing the Act on its third reading, the Legislative Yuan also adopted 15 accompanying resolutions addressing issues such as the regulatory framework for virtual asset derivatives and related services, supporting measures for offshore operators establishing a local presence in Taiwan, and mechanisms for returning seized property and proceeds of crime in virtual environments. In addition, the numerous subordinate regulations authorized under the Act will determine how the respective regulatory mechanisms are implemented in practice and the intensity of regulatory oversight. These matters remain subject to further consideration by the competent authorities.
Businesses operating in the virtual asset sector should begin reviewing their current operations and identifying potential compliance gaps. They should also closely monitor the effective date of the Act, the implementation of the accompanying resolutions, and developments in the subordinate regulations to be adopted under the Act. Taking these steps will help businesses prepare for the new regulatory regime in a timely manner and strategically plan their future operations.
In recent years, the financial applications of virtual assets have become increasingly widespread, accompanied by the continued expansion of related services. Accordingly, Taiwan’s regulatory focus has evolved beyond anti-money laundering (“AML”) to encompass the sound operation of service providers, the protection of customer assets, and the maintenance of a fair and transparent trading environment.
On June 30, 2026, Taiwan’s Legislative Yuan passed the Virtual Asset Service Act (the “Act”) on its third reading, and the Act was promulgated by the President on July 22 of the same year. The passage of the Act not only marks the transition of virtual asset service provider (“VASP”) regulation from a registration regime to a licensing regime, but also establishes a legal foundation for financial institutions’ participation in virtual asset businesses, stablecoin issuance, customer asset protection, and market order. This article outlines the key provisions of the Act and briefly discusses the direction of virtual asset regulation in Taiwan.
II. Overview of the Act’s Key Provisions
1. Transition from a Registration Regime to a Licensing Regime
Article 6 of the Act expressly defines the regulated categories of virtual asset services, including virtual asset exchange services, virtual asset trading platform services, virtual asset transfer services, virtual asset custody services, virtual asset underwriting services, virtual asset lending services, and other virtual asset services.
VASPs must obtain approval and a license from the competent authority before engaging in such virtual asset businesses (Article 7 of the Act). To facilitate the transition to the new regime, VASPs that have completed AML registration must apply to the competent authority for approval within twelve (12) months after the Act takes effect and obtain a license within twenty-one (21) months after the Act takes effect. Where necessary, the latter period may be extended by three (3) months (Article 55 of the Act).
2. Financial Institutions Permitted to Concurrently Engage in Virtual Asset Businesses
Under the Act, financial institutions may, with the approval of the competent authority, concurrently engage in virtual asset businesses and thereby qualify as “virtual asset service providers” as defined under the Act (Article 7, Paragraph 4 of the Act). This provision establishes a licensing pathway for traditional financial institutions seeking to enter the virtual asset sector.
3. Stablecoin Regulations
The Act’s stablecoin regulatory framework centers on three key requirements: licensed issuance, full reserve backing, and redemption at par value.
To issue stablecoins in Taiwan, an issuer must be a company limited by shares, maintain the minimum paid-in capital prescribed by the competent authority, obtain approval from the Financial Supervisory Commission, and secure the consent of the Central Bank (Article 34 of the Act).
To ensure that stablecoin holders are able to redeem their stablecoins, an issuer must establish and continuously maintain reserve assets sufficient to fully back the stablecoins in circulation. Such reserve assets must be deposited with domestic financial institutions, segregated from the issuer’s own assets, and subject to periodic audits. Except under circumstances prescribed by law, the issuer may not use or otherwise dispose of the reserve assets at its discretion (Article 36 of the Act).
The issuer is also required to issue and redeem stablecoins at par value. Unless otherwise provided by law or under special circumstances prescribed by the competent authority, the issuer may not refuse a stablecoin holder’s redemption request. In addition, the issuer may not pay any form of interest or return on stablecoins (Article 37 of the Act).
Furthermore, if the issuer becomes bankrupt, the reserve assets described above will not form part of its bankruptcy estate, and stablecoin holders will have a preferential right to satisfaction from such assets. These safeguards are intended to reinforce the issuer’s redemption commitment and protect the rights and interests of stablecoin holders (Article 38 of the Act).
4. Investor Protection Provisions
For purposes of investor protection, the Act’s safeguards may be considered from the perspectives of asset protection and market order.
When providing services, VASPs must adhere to the principles of fairness, reasonableness and good faith, and must fulfil their duties of care as a prudent manager and their fiduciary duties (Article 16 of the Act). They are also required to maintain the confidentiality of customer and transaction information (Article 17 of the Act).
With respect to asset protection, customer assets must be segregated from the VASP’s own assets and may not be used or otherwise disposed of except in accordance with customer instructions or under circumstances prescribed by law. If the VASP becomes bankrupt, customer assets will not form part of its bankruptcy estate (Article 18 of the Act). Fiat currency retained on behalf of customers must be placed in trust or fully guaranteed by a bank. As a general rule, a VASP may not refuse a customer’s request to withdraw or transfer assets (Articles 19 and 20 of the Act).
To maintain market order, the Act also protects customer interests and promotes the sound operation of virtual asset markets through requirements concerning the disclosure of financial and business information, offering documents, reviews of the listing and delisting of virtual assets, mechanisms to prevent unfair trading practices, periodic reconciliation of assets under custody, and audits by certified public accountants. The Act further expressly prohibits false statements, fraud, or concealment involving material information, as well as manipulative conduct intended to affect prices or create a misleading appearance of active trading. Violators may be subject to imprisonment for a term of three (3) to ten (10) years and a criminal fine of between NT$10 million and NT$200 million. The Act also grants bona fide traders the right to claim damages (Articles 47 and 42 of the Act).
III. Conclusion
The passage of the Act marks the beginning of a new phase in Taiwan’s regulation of virtual assets. Notably, when passing the Act on its third reading, the Legislative Yuan also adopted 15 accompanying resolutions addressing issues such as the regulatory framework for virtual asset derivatives and related services, supporting measures for offshore operators establishing a local presence in Taiwan, and mechanisms for returning seized property and proceeds of crime in virtual environments. In addition, the numerous subordinate regulations authorized under the Act will determine how the respective regulatory mechanisms are implemented in practice and the intensity of regulatory oversight. These matters remain subject to further consideration by the competent authorities.
Businesses operating in the virtual asset sector should begin reviewing their current operations and identifying potential compliance gaps. They should also closely monitor the effective date of the Act, the implementation of the accompanying resolutions, and developments in the subordinate regulations to be adopted under the Act. Taking these steps will help businesses prepare for the new regulatory regime in a timely manner and strategically plan their future operations.
