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1 Authorized and enforcement framework
1.1 In broad phrases, which legislative and regulatory provisions govern digital currencies in your jurisdiction?
Presently, no single set of legal guidelines or laws particularly governs digital currencies in Taiwan. The Monetary Supervisory Fee (FSC) typically characterises Bitcoin and different digital currencies as extremely speculative digital items which are purchased and offered for revenue. Moreover, the FSC has repeatedly warned residents that digital currencies are extremely speculative and dangerous property.
The FSC issued a ruling on 27 June 2019 stating that sure tokens that meet the Howey check will represent a securities token providing (STO). The standards of the Howey check are as follows:
- There’s an funding of cash;
- in a standard enterprise;
- with an expectation of income from the funding; and
- the income come primarily from the efforts of the issuer or a 3rd get together.
Such tokens are handled as securities beneath Taiwan regulation and are topic to all related securities laws, together with the Securities Alternate Act of Taiwan.
1.2 In broad phrases, which legislative and regulatory provisions govern entities that present companies regarding digital currencies? Should they be registered or licensed by a regulatory authority?
No particular regulatory provisions govern entities that present companies regarding digital currencies. Nonetheless, if the issuance or providing of digital tokens constitutes an STO beneath the Howey check (see query 1.1), the issuer should adjust to current securities legal guidelines and laws in Taiwan.
As well as, any entity that gives companies regarding digital currencies (eg, buying and selling platforms) should adjust to the Cash Laundering Management Act. The federal government has but to promulgate the main points related to compliance by digital foreign money service suppliers, however it’s anticipated to take action within the close to future.
1.3 Which our bodies are accountable for implementing the relevant legal guidelines and laws? What powers have they got?
The FSC is the executive physique accountable for implementing the monetary companies laws that govern companies comparable to banks, securities corporations, futures corporations and insurers. Presently, it’s unclear whether or not digital currencies fall throughout the supervisory framework of the FSC.
Nonetheless, if the issuance or providing of digital tokens constitutes an STO beneath the Howey check (see query 1.1), such issuance or providing will fall beneath the jurisdiction of the FSC.
1.4 What’s the regulators’ basic strategy to digital currencies?
Since 2013, the FSC has issued a number of press releases to remind the general public of the dangers of investing in digital currencies, together with the value volatility of digital currencies and the danger of digital currencies being stolen by hackers or being utilized in illicit actions.
The FSC additionally views digital currencies as ‘extremely speculative digital items’ and has reminded the general public to pay attention to the dangers of digital currencies earlier than investing. All indications are that the FSC will preserve an in depth eye on the event of digital currencies and the suppliers of associated companies.
1.5 Has there been any notable enforcement motion regarding digital currencies?
As but there was no notable enforcement motion instantly regarding digital currencies. Nonetheless, each time cases of suspected fraud or multi-level advertising scams contain digital currencies, such circumstances are typically investigated for potential violations of prison regulation or the Cash Laundering Management Act.
2.1 How are ‘digital currencies’ outlined in your jurisdiction? Have there been any judicial selections which have helped to outline digital currencies or their interaction with the prevailing physique of legal guidelines (eg, contracts regulation, property regulation)?
The Monetary Supervisory Fee (FSC) and the Central Financial institution of Taiwan nonetheless view digital currencies as ‘digital items’, which don’t possess the traits of fiat cash.
The identical view has been expressed in judicial selections.
2.2 How are ‘preliminary coin choices’ and ‘safety token choices’ outlined in your jurisdiction?
As outlined by the FSC in 2017, an ‘preliminary coin providing’ is a manner of elevating funds whereby firms concern ‘digital items’ comparable to digital rights, digital property and digital currencies for buyers to purchase.
In 2019 the FSC additional outlined ‘safety tokens’ as “digital currencies with the character of securities”. The FSC adopted the Howey check to distinguish safety tokens from digital currencies or tokens (see query 1.1).
2.3 Are stablecoins handled as digital currencies in your jurisdiction or do they fall beneath an current class (eg, digital cash)?
To our data, there aren’t any particular laws or official authorities opinions on the remedy of stablecoins.
3 Digital currencies market
3.1 Which digital currencies have grow to be most embedded in your jurisdiction? Does this differ relying on the precise use?
Digital currencies are principally handled as digital items that individuals put money into. At current, Bitcoin is essentially the most prevalent and well-recognised digital foreign money in Taiwan.
3.2 What totally different services and products are supplied?
Digital foreign money service suppliers in Taiwan typically present transaction companies between totally different cryptocurrencies. Various service suppliers additionally present transaction companies between digital currencies and fiat currencies.
3.3 How are digital foreign money service suppliers typically structured? How are they typically financed?
In Taiwan, the suppliers of digital foreign money companies platforms could also be structured as offshore firms or onshore firms that present companies in Taiwan. Typically, they’re financed by founders who set up such companies as web companies, in addition to by buyers that put money into the fairness of such companies.
3.4 Are digital foreign money buying and selling platforms topic to a selected regulatory regime in your jurisdiction? Should they be registered or licensed by a regulatory authority? Does this differ relying on whether or not the platform accepts authorized foreign money or whether or not the platform is custodial? Are digital foreign money buying and selling platforms topic to any type of ‘market abuse’ regulation?
Digital foreign money buying and selling platforms aren’t topic to particular laws in Taiwan and needn’t be registered or licensed. Nonetheless, digital foreign money buying and selling platforms are topic to the Cash Laundering Management Act. If such platforms settle for authorized foreign money, they usually cooperate with banks to offer deposit and withdrawal companies.
Aside from that, if the actions of buying and selling platforms contain securities token choices (STO), they are going to be topic to further laws. Laws governing STOs of beneath NTD 30 million have been issued on 20 January 2020, which embody compliance guidelines for token issuers and pointers on the difficulty of prospectuses to buyers and different laws beneath the Securities and Exchanges Act. STO platforms should acquire a securities vendor allow earlier than they will conduct such actions. Beneath the present laws, for STOs above NTD 30 million, the issuer should first apply for inclusion within the regulatory sandbox regime beneath the Monetary Know-how Growth and Revolutionary Experimentation Act earlier than such choices may be made (see query 11.1).
4 Crossover with banking
4.1 How are digital currencies positioned throughout the broader banking panorama in your jurisdiction?
On condition that the Monetary Supervisory Fee (FSC) nonetheless views digital currencies as ‘digital items’ reasonably than fiat cash, and forbids monetary establishments from offering deposit and alternate companies for digital currencies, there’s little interplay between the banking system and digital currencies. Nonetheless, some native banks nonetheless function fiat cash fee service suppliers for some digital foreign money exchanges.
4.2 What impression may mainstream adoption of digital currencies have on the flexibility to manage inflation in your jurisdiction?
As this concern requires data of advanced macroeconomic elements in Taiwan, we shouldn’t have adequate experience to offer an opinion.
4.3 What different implications may the mainstream adoption of digital currencies have for the banking system in your jurisdiction (eg, with respect to fee companies)?
There isn’t a signal that the adoption of digital currencies can have any implications for fee companies or the banking system.
4.4 Concerning decentralised finance, do the banking laws in your jurisdiction apply to loans of digital currencies or interest-bearing deposits of digital currencies? Does this differ relying on whether or not stablecoins are loaned or deposited?
No, the banking laws don’t apply to digital currencies in Taiwan, whether or not stablecoins or in any other case. Moreover, the FSC has explicitly prohibited banks in Taiwan from dealing in digital currencies.
5.1 Is blockchain know-how in itself regulated in your jurisdiction and what particular authorized points are related to its use?
There aren’t any related laws or governmental opinions on blockchain know-how.
5.2 What different implications may the mainstream adoption of digital currencies have from a technological perspective?
Digital currencies stay a distinct segment asset exterior the mainstream for most individuals in Taiwan. Due to this fact, it’s unclear what impression they may have in case of their mainstream adoption.
6 Knowledge safety and cybersecurity
6.1 What’s the relevant information safety regime in your jurisdiction and what particular implications does this have for digital currencies?
All information controllers are topic to the Private Knowledge Safety Act (PDPA), together with digital foreign money service suppliers. Pursuant to the PDPA, information collectors and processors should adjust to sure necessities when amassing private information from people.
Knowledge controllers should additionally implement acceptable safety measures to forestall private information from being stolen, altered, broken, destroyed or disclosed beneath the PDPA.
6.2 What’s the relevant cybersecurity regime in your jurisdiction and what particular implications does this have for digital currencies?
Cybersecurity is ruled by the Cyber Safety Administration Act (CSMA). The CSMA doesn’t apply to all enterprise entities: its most important targets are authorities businesses and important infrastructure suppliers. The particular entities to which it applies are nonetheless beneath dialogue by the competent authorities; however in line with a press launch issued by the Govt Yuan, entities comparable to power firms, healthcare suppliers and main monetary establishments are prone to be designated as essential infrastructure suppliers. Entities which are thought-about essential infrastructure suppliers might be topic to the safety and reporting necessities beneath the CSMA.
To guard themselves from hacks, in observe, digital foreign money buying and selling platforms usually set up their very own inside management protocols to determine danger elements and conduct common danger assessments.
For buying and selling platforms whose actions contain STOs beneath NTD 30 million, the Taipei Alternate has issued related laws with which they have to comply, together with related inside management pointers.
As well as, offences comparable to hacking and denial of service assaults will incur prison penalties, together with imprisonment and fines.
7 Monetary crime
7.1 What provisions govern cash laundering and different types of monetary crime in your jurisdiction and what particular implications do these have for digital currencies?
The Cash Laundering Management Act (MLCA) governs cash laundering actions and associated crimes in Taiwan. In 2018, digital foreign money platforms and buying and selling companies have been included throughout the scope of the MLCA. Digital foreign money platforms are typically required to undertake buyer due diligence to confirm the identification of shoppers and helpful homeowners, and to retain all info obtained from this course of. It’s anticipated that related guidelines and laws governing the implementation of the MLCA by digital foreign money platforms might be issued within the close to future.
8 Client safety
8.1 What client safety provisions apply to digital currencies in your jurisdiction?
As talked about in query 2.1, digital currencies are considered as ‘digital items’ in line with the Monetary Supervisory Fee. Nonetheless, beneath the Buyer Safety Act (CPA) ‘items’ are outlined as actual property or private property in enterprise transactions, together with finish merchandise, semi-finished merchandise, uncooked supplies, elements and elements. Therefore, digital currencies don’t fall throughout the scope of the CPA. It’s also unclear whether or not digital foreign money service suppliers would qualify as ‘monetary companies enterprises’ beneath Monetary Buyer Safety Act. Consequently, in case of disputes involving digital currencies, clients can solely search cures beneath civil regulation.
8.2 What different implications may the mainstream adoption of digital currencies have from a client perspective?
Digital currencies could possibly be considered as various area of interest property from a client perspective.
9.1 Do digital currencies current any particular challenges or considerations from a contest perspective?
We presently don’t envisage any notable challenges or considerations from a contest perspective.
10.1 How are transactions in digital currencies handled from a tax perspective in your jurisdiction?
Based on the Ministry of Finance, the transaction charges charged by digital foreign money buying and selling platforms represent consideration for the sale of companies. Due to this fact, if a transaction happens inside Taiwan, each enterprise tax and revenue tax must be levied on the transaction charges. As regards the buying and selling of digital currencies, revenue tax must be levied on the revenue from the transaction.
11 Traits and predictions
11.1 How would you describe the present panorama and prevailing developments in your jurisdiction as regards digital currencies? Are any new developments anticipated within the subsequent 12 months, together with any proposed legislative reforms?
In 2018 the Monetary Supervisory Fee launched the Monetary Know-how Growth and Revolutionary Experimentation Act, which establishes the regulatory sandbox regime, with the intention of selling the event of monetary know-how. Taiwan has additionally launched laws on securities token choices, though the necessities are thought-about reasonably stringent for digital buying and selling platforms. The federal government is anticipated to promulgate guidelines and laws relating to anti-money laundering for digital foreign money service suppliers within the close to future.
We anticipate that the federal government will proceed discussions with digital foreign money service suppliers on how greatest to handle the fast innovation on this house.
12 Suggestions and traps
12.1 What are your high ideas for digital foreign money suppliers in search of to enter your jurisdiction and what potential sticking factors would you spotlight?
Regardless of the present lack of formally promulgated guidelines on anti-money laundering, it’s advisable that new digital foreign money service suppliers:
- implement sturdy know-your-customer and anti-money laundering protocols to manage dangers; and
- retain cheap transaction data to allow them to answer potential inquiries from authorities businesses and regulation enforcement our bodies.
As Taiwan applies the Howey check to securities token choices (STO) (see query 1.1), any token providing inside Taiwan mustn’t fall beneath the definition of an ‘STO’ beneath the Howey check. An STO that meets this definition might happen in Taiwan provided that it:
- conforms to the STO laws in Taiwan; and
- is licensed by the Monetary Supervisory Fee (FSC) or is effected by means of a service supplier licensed by the FSC.
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