The law, which cleared its third reading in the Legislative Yuan, defines seven categories of virtual asset service providers: exchanges, trading platforms, transfer services, custody providers, underwriters, lending platforms, and other designated services. Each category will be subject to requirements covering internal controls, audits, cybersecurity, listing reviews, segregated custody, outsourcing, and financial reporting. For related coverage, see Taiwan Legislature Approves Crypto Law Establishing Regulatory Framework.
The Executive Yuan had approved the Financial Supervisory Commission’s draft on April 2, 2026, describing it as a comprehensive regulatory framework before sending it to the legislature for deliberation. Taiwan previously relied mainly on anti-money laundering registration for crypto businesses, a lighter-touch approach that left significant gaps in investor protection and operational oversight. For related coverage, see Taiwan Indicts 14 in $75M Crypto Laundering Case.
What Taiwan’s New Crypto Law Establishes
The act shifts Taiwan from a registration-based system to a full licensing regime. VASPs operating in Taiwan will need FSC approval, and the law codifies obligations around client-asset segregation, cybersecurity standards, and financial reporting that were previously handled through informal guidance. For related coverage, see Taiwan Rejects U.S. Semiconductor Relocation Proposal.
Stablecoin issuance receives its own dedicated framework. Any entity seeking to issue stablecoins in Taiwan will need both Central Bank consent and FSC approval, must maintain full reserve backing with assets held in trust, and will face periodic inspections and mandatory disclosures.
The penalty structure is steep. Illegally operating a VASP or issuing stablecoins without authorization can result in up to seven years in prison and a fine of up to NT$100 million.
Fraud or price manipulation carries even harsher consequences: three to 10 years in prison and fines ranging from NT$10 million to NT$200 million.
Why the Framework Matters for Exchanges and Stablecoin Issuers
For crypto exchanges already operating in Taiwan, the law creates a defined transition path. Existing VASPs that completed anti-money laundering registration before the law takes effect will have 12 months to apply for licenses and 21 months to obtain approval.
Kevin Cheng noted that traditional financial institutions will also be allowed to operate VASPs in the future, a provision that could reshape the competitive landscape for existing crypto-native exchanges in Taiwan.
“Traditional financial institutions will also be allowed to operate VASPs in the future.”
Kevin Cheng, via The Block
For stablecoin issuers, the dual-approval requirement involving both the Central Bank and FSC sets a high bar for market entry. The trust-custody mandate for reserve assets and periodic inspection regime mirror approaches taken in other jurisdictions that have moved to formalize stablecoin regulation.
The law arrives as Taiwan has been pursuing enforcement actions against crypto-related crime, including recent indictments in a major laundering case. The new framework gives regulators explicit statutory authority rather than relying on AML rules designed for broader financial crime prevention.
What the Law Signals for Taiwan’s Crypto Market
Taiwan joins a growing list of jurisdictions, including the EU with MiCA and Hong Kong with its VASP licensing regime, that have moved from informal oversight to dedicated crypto legislation. The act positions Taiwan’s FSC as the primary regulator for the sector, with the Central Bank retaining a gatekeeping role over stablecoin issuance specifically.
Implementation will be the next test. The FSC will need to issue subsidiary regulations detailing how each of the seven VASP categories should meet the law’s requirements on internal controls, cybersecurity, and financial reporting. The transition windows give existing operators runway, but new entrants will face the full licensing process from day one.
Taiwan also holds seized crypto assets from criminal cases, and the new legal framework may clarify how authorities handle digital assets in enforcement contexts going forward.
The law’s passage comes during a period of broad market unease. The Fear & Greed Index sits at 11, deep in “Extreme Fear” territory, suggesting that regulatory clarity may be arriving at a moment when institutional confidence-building measures carry added weight for the industry.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.