Taiwan's encryption special law proposes heavy penalties: up to ten years for fraud and manipulation, up to seven years for operating without a license, and up to five years for misappropriation of assets

On the morning of 2/13, the Financial Supervisory Commission of Taiwan held a public hearing on the draft of the "Virtual Asset Service Act," where the content of the bill, which has not been officially released, was disclosed in advance. This special law establishes clear standards for the operation regulations, criminal liabilities, and penalties for virtual asset operators, with a maximum fine of 200 million New Taiwan Dollars and a maximum sentence of 10 years imprisonment, demonstrating the government's zero-tolerance attitude towards market violations.

Imposing heavy penalties of up to 10 years imprisonment for fraud and manipulation using virtual currency

According to the Economic Daily News, in the draft, the FSC has set strict penalties for illegal activities in the cryptocurrency market, especially for behaviors involving fraud or market manipulation, which will face severe penalties. Among them, if there are illegal activities such as using virtual assets for fraud or market manipulation, the fine starts from 10 million New Taiwan Dollars, up to a maximum of 200 million New Taiwan Dollars, and a prison sentence of more than 3 years and up to 10 years.

Referring to the regulatory models in Japan and Hong Kong, the FSC has further clarified the definition of "manipulation". Any attempt to influence the trading price of virtual assets or create the illusion of market activity, whether directly or indirectly interfering with market prices or supply and demand, is an offence and will be punished according to law.

Trading platforms need to establish market surveillance mechanisms

In order to ensure fair market trading, the Financial Supervisory Commission requires in the special law that virtual asset trading platforms must set up mechanisms to prevent unfair trading in the market, including measures such as abnormal price and volume alerts, to avoid market manipulation or affecting investors' rights and interests. This regulation aims to increase market transparency and reduce the risks of market manipulation and insider trading.

Operators must obtain a license within 15 months.

The FSC has also stipulated the transitional arrangements for virtual asset operators. After the law is enacted, operators must apply for a license from the competent authority within 6 months at the latest, and obtain an official license within 15 months, otherwise they will face penalties for non-compliance. This regulation will ensure that market participants meet regulatory standards, enhancing market stability and compliance.

Operating without permission may result in a maximum fine of 100 million yuan and 7 years of imprisonment.

For operators who engage in virtual asset business without a license, the FSC has imposed strict penalties, including a maximum of 7 years imprisonment and a fine of 100 million yuan.

In addition, if the operator misappropriates customer assets, the person in charge will face a maximum of 5 years imprisonment and jointly bear a maximum of 50 million Taiwan dollars in fines with the company. As for administrative penalties such as internal control violations, fines ranging from 300,000 to 6 million Taiwan dollars will be imposed.

Stablecoin issuance is restricted and requires approval from the FSC and the central bank.

In the draft Virtual Asset Service Act, the issuance and management of stablecoins are subject to special regulations. According to the law, stablecoin issuers must obtain approval from the FSC and consult with the central bank before obtaining the license.

Stablecoin issuers must comply with the following regulations:

Have certain eligibility criteria and complete the application process

Only specific types of stablecoins can be issued

Prepare assets must be stored in domestic financial institutions and managed separately from their own property.

When the issuer of stablecoin goes bankrupt, the reserve assets shall not be included in the bankruptcy estate for liquidation.

At the same time, the FSC and the central bank will jointly formulate regulations on the issuance, redemption, and management of stablecoins to ensure the stable operation of the market.

Stablecoins issued overseas may not be issued in Taiwan

Regarding commonly seen overseas stablecoins in the current market, such as Tether (USDT), the FSC clearly stated that since their assets are not held in Taiwan, they do not meet the regulatory requirements. After the legislation is in place in the future, these types of overseas stablecoins can still be traded on trading platforms, but operators are not allowed to issue them in Taiwan under the name of 'stablecoin'.

Special regulations on the road, strengthen market trust

The draft of the "Virtual Asset Service Act" proposed by the FSC demonstrates the government's emphasis and regulatory determination on the virtual asset market. Through strict penalties, exchange platform supervision mechanisms, and stablecoin management regulations, the market order will be more sound, and investors' rights and interests will also be more effectively protected. In the future, with the formal implementation of the law, Taiwan's virtual asset market will enter a more standardized and transparent development stage.

This article proposes heavy penalties for Taiwan's special encryption law: up to ten years for fraud and manipulation, up to seven years for unlicensed operations, and up to five years for misappropriation of assets. It first appeared on Chain News ABMedia.