Taiwan has introduced its first steps toward crypto regulation by proposing a Virtual Asset Management Ordinance Draft bill, which has passed its first hearing at Taiwan’s parliament, the Legislative Yuan. The bill was co-authored by 17 lawmakers who believe that crypto assets are distinct from traditional financial products and warrant special regulations.

The goal of the bill is to introduce a regulatory framework and create oversight over the crypto industry. While Taiwan’s Financial Supervisory Commission (FSC) had previously released guidelines for the crypto sector, the proposed bill would provide legal enforceability for crypto businesses that the FSC’s guidelines were lacking.

At the moment, Taiwanese virtual asset service providers need to comply with anti-money laundering laws, yet the crypto industry remains largely unregulated. The proposed bill would upheave this by setting operational standards for asset operators, enhancing customer protection, and requiring all cryptocurrency platforms operating in Taiwan to obtain a permit.

While this first iteration of the proposed bill would require operators of exchanges to allow regulators, such as the FSC, to regularly inspect their systems, it currently does not take a strong position on derivatives or stablecoins, restrict trading of virtual assets to professional investors or explicitly mandate the use of third-party custodians.

An exact timeline for the second reading of the bill has not been outlined, but the FSC is expected to add its own submissions to the draft before the next reading.

A member of the Legislative Yuan and of the co-authors of the bill, Yung-Chang Chiang, said: “We hope that the Financial Supervisory Commission can also submit their version of a draft bill to the legislature, allowing various sectors of society to further consolidate consensus during the process.”