Taiwan’s Executive Yuan has recently approved a draft Virtual Asset Service Act, aimed at establishing a systematic regulatory framework for virtual asset service providers and stablecoin issuers in order to strengthen market order and enhance investor protection. The core requirements of the draft include: service providers must maintain financial soundness, ensure the segregation of client assets from proprietary assets, and prevent unfair trading practices, thereby improving overall market trust. 

The draft defines “virtual assets” as value representations that use cryptography or distributed ledger technology and can be stored, transferred, or exchanged in digital form for payment or investment purposes. Legal tender, securities, and non-fungible tokens (NFTs) are expressly excluded. “Stablecoins” are defined as virtual assets whose value is pegged to fiat currencies for the purpose of maintaining price stability. 

The draft further stipulates that service providers must obtain prior approval from the competent authority before commencing operations, and are required to establish internal control and internal audit systems as well as information security protection mechanisms, while complying with disclosure and market conduct regulations. Disseminating false information that undermines fair trading is also prohibited, and the competent authority is vested with powers of inspection and sanction. Regarding criminal liability, those who issue stablecoins without authorization may face up to seven years’ imprisonment and may be subject to a concurrent fine of up to NT$100 million, with the aim of deterring violations and promoting the sound development of the virtual asset market.