Taiwan’s push for greater regulation within the crypto industry has taken a major step forward with the recent release of a proposed regulatory framework. The proposal has been met with enthusiasm by those within the industry, as it could offer a green light to crypto-industry associations to grow and professionalize the space. This article attempts to explore the implications of the proposal and what it could mean for the future of crypto in the country.
- 1. Taiwan Prepares to Open Market for Crypto Industry Associations
- 2. Details of Regulatory Proposal for Crypto Industry Associations in Taiwan
- 3. How Crypto Industry Associations Can Benefit From the Proposal
- 4. Potential Challenges that Could Arise from the Regulatory Proposal
1. Taiwan Prepares to Open Market for Crypto Industry Associations
In a move that signals an openness to the cryptocurrency industry, Taiwan’s government is allowing the establishment of professional associations for the crypto space. The move is seen as a way for the government to exercise greater oversight and provide more reassurance that digital assets, tokens, and other products linked to digital finance are being managed in a responsible manner.
Establishment Criteria
The Financial Supervisory Commission (FSC) of Taiwan specified criteria for the establishment of professional associations. It stipulates that such organization must have at least 20 and no more than 200 members and operating within Taiwan’s borders. A capital of 10 million NT is required to launch the project and must include independent directors who are not employed by or have any affiliation to members of the organization.
Further, at least half of the directors must have had professional experience of a minimum of three years within the cryptocurrency/Digital Assets related sectors as well as at least half of the members must be active players in the industry.
Oversight and Taxation
Under the new rules, the professional association will be tasked to oversee the members and ensure their compliance with various laws. This includes the Anti-Money Laundering (AML) legislation that obligates companies to perform customer due diligence (CDD). The association will be required to report suspicious trading activities to the FSC.
Additionally, the professional association will be responsible for the issuance of annual statement detailing the income associated with all its members. This will enable the identification of taxable income that will be subject to appropriate taxation.
Membership Benefits
It is expected that the professional association will provide numerous benefits to its members:
- Risk management/advisory services
- Mentoring and training program
- Networking and sharing of best practices
- Access to government support
- Access to security audits, digital asset custody solutions, and other infrastructure services.
2. Details of Regulatory Proposal for Crypto Industry Associations in Taiwan
Issuing Rules for Association Members
Crypto industry associations in Taiwan are mandated to create and enforce appropriate rules and regulations for their members. These rules should be designed to ensure that members abide by the association’s code of conduct, protect consumers from frauds or scams, and provide a level playing field for all participants. Additionally, the rules should also encompass any legal, regulatory, or policy requirements specific to Taiwan.
Some of the regulatory measures that the associations should deploy include:
- Ensuring timely reporting of critical information such as customer transaction records and any suspicious activity.
- A set of licensing requirements for the members that are consistent with international standards.
- Adoption of vetting processes to ensure users comply with the laws of the country.
- Establishment of suitable know-your-customer (KYC) and anti-money laundering (AML) rules.
- Full disclosure and transparency into operations and activities.
These rules should be diligently implemented by the associations with penalty provisions for their members who breach them. Such measures are essential to ensure that the crypto industry in Taiwan is well-regulated and is compliant with the international laws.
3. How Crypto Industry Associations Can Benefit From the Proposal
Collaboration and Networking
Crypto industry associations can benefit greatly from the proposal through improved collaboration and networking. By forming long-term partnerships between blockchain initiatives, associations can revitalize their membership and create much needed visibility. Through these partnerships, blockchain initiatives can make their assets more accessible to members, while associations can provide expertise and guidance. Additionally, associations can facilitate informational exchange through hosting conferences, workshops, meetings, and more.
Investment Opportunities
The proposal also enables associations to seek out new investment opportunities. Through the use of distributed ledger technology, crypto industry associations can access an array of new investments both near and far. Furthermore, this technology can provide more in-depth information that investors may not be able to obtain from traditional methods, enhancing an association’s ability to maximize benefits from investments.
Regulatory Compliance
Crypto industry associations should also benefit from the proposal in terms of regulatory compliance. In the crypto space, regulatory compliance is a critical undertaking and can be time-consuming. With distributed ledger technology, crypto industry associations can track and monitor compliance regulations with clarity and insight. This allows for improved process effectiveness while also providing real-time updates.
4. Potential Challenges that Could Arise from the Regulatory Proposal
Scope of the Proposal
One of the primary potential challenges of the proposed regulatory measure is the scope of the regulations it proposes. As many of the regulations are worded widely, there is a risk that the law may expand beyond its initial purpose and create liability for actions that are not necessarily within the scope of the law. This could lead to confusion in the industry and potential legal challenges.
Vagueness of Language
The language used in the regulatory proposal is also somewhat unclear and open to interpretation. This, in combination with the scope of the regulations, could mean that the proposed measures could apply in certain circumstances that weren’t initially intended. It is important that any legal language used in a regulatory measure have a clear and defined meaning in order to avoid potential legal challenges.
Practicality of Implementation
This proposed regulation could also present a practical challenge with regards to how/when the regulations are implemented and how they will be enforced. If the regulations are implemented too quickly, it could present a challenge and create confusion due to the potential lack of preparation/adequate training of personnel required to enforce the regulations. Additionally, if the implementation is too slow, then it could be argued that the regulations are not being enforced in a timely manner.
For these reasons, it is important to ensure that the proposed regulations are not overly burdensome and practical in terms of implementation. Populations affected by the regulations should also be adequately informed of the changes in order to ensure that they are able to comply with the proposed regulations.
The passage of this new proposal is a positive step for the cryptocurrency industry in Taiwan, as it grants more clarity to industry regulations and offers several organizations the support and assurance to ensure greater compliance with the industry’s legal framework. This proposal is a great example of the Taiwanese government’s openness to new technologies and its commitment to the stable growth of the crypto industry in Taiwan.