In a significant development for the financial technology landscape, Taiwan is gearing up to foster institutional adoption of cryptocurrencies through a new initiative involving local banks. The Financial Supervisory Commission (FSC) of Taiwan plans to pilot crypto custody services, aiming to integrate digital assets more deeply into the financial systems.
As reported by the Central News Agency on October 8, the FSC is in the preparatory phase of launching an institutional trial for crypto custody services. This initiative is set to commence with application collection in the first quarter of 2025, indicating a structured approach towards integrating cryptocurrencies such as Bitcoin, Ether, and Dogecoin into mainstream financial services.
Participation and Interest from Local Banks
Three private banks in Taiwan have already shown interest in participating in this pilot project, reflecting a growing willingness among financial institutions to engage with the burgeoning crypto market. The FSC has outlined that participating institutions will need to specify the types of digital assets they intend to manage, ranging from major cryptocurrencies to potentially lesser-known tokens.
According to Hu Zehua, director of the comprehensive planning division at the FSC, detailed information regarding the trial will be made public at least 15 days before the commencement of application submissions. This advance notice is intended to ensure transparency and allow for adequate preparation by interested parties. Additionally, the FSC plans to gather public feedback on the pilot initiative and make necessary adjustments to refine the process, underscoring a commitment to regulatory prudence and stakeholder engagement.
Taiwan’s Anti-Money Laundering Measures
In parallel with these developments, the FSC updated Taiwan’s Anti-Money Laundering framework on October 2 to incorporate regulations specific to cryptocurrency usage. This update mandates all crypto companies to register with the government by September 2025. Failure to comply could result in severe penalties, including prison terms of up to two years or fines up to $156,000, highlighting the government’s stringent approach to compliance and security in the crypto space.
Taiwan’s proactive regulatory stance and the authorization for professional investors to engage with foreign cryptocurrency exchange-traded funds (ETFs) in September reflect its strategy to enhance its financial market’s competitiveness and diversity. Legal experts from Regulated United Europe have noted that while Taiwan does not recognize cryptocurrency as legal tender, it permits and regulates cryptocurrency investments, providing a structured framework that supports the industry’s growth.
The island’s approach contrasts sharply with that of mainland China, where a significant crackdown on cryptocurrency transactions was announced in 2021. This divergence underscores differing regulatory philosophies in the region and highlights Taiwan’s role as a potentially pivotal market for cryptocurrency innovation and investment in Asia.
Potential as a Major Crypto Hub
The World Blockchain Summit has identified Taiwan as potentially the “next major crypto market,” despite the absence of specific crypto-related legislation so far. This prediction is supported by Taiwan’s robust technology sector, innovative financial policies, and the strategic initiatives being undertaken by the FSC to integrate crypto into the nation’s economic fabric.
As Taiwan prepares to trial crypto custody services through its local banks, the initiative represents a forward-thinking approach to embracing digital currency within a regulated framework. This move not only enhances the financial services landscape but also positions Taiwan as a leader in cryptocurrency adoption in Asia, setting a benchmark for others in the region.
Featured image credit: DALL-E by ChatGPT
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