Taiwan's FSC drafts new crypto AML rules, requiring firms to register or face jail time

Taiwan’s financial regulator, the Financial Supervisory Commission, has drafted proposed new anti-money laundering regulations following amendments made to the laws in July. These regulations require cryptocurrency firms to register by the end of September next year. Non-compliance may lead to penalties, including imprisonment for up to two years.

The FSC said in a statement on Wednesday that it has drafted relevant regulations, explicitly targeting virtual asset service providers (VASP) and requiring them to complete AML registration.

Taiwan currently requires VASPs to comply with AML laws based on the FSC’s rules introduced in July 2021, which the new rules will soon replace. The FSC specified in Monday’s statement that regardless of whether a provider has completed the existing compliance declaration, “all providers must follow the new VASP registration regulations and complete the registration process.”

The new regulations will take effect on Jan. 1, 2025, and VASPs are expected to complete AML registration by the end of September. Otherwise, they could face imprisonment for up to two years and a fine of up to NT$5 million ($155,900), according to local media  reports  citing the FSC.

Kevin Cheng, a crypto lawyer and secretary general of the Taiwan Fintech Association, told The Block that with the new rules in place, non-compliant operators will be held criminally liable, while compliant operators will face stricter regulatory obligations. “The entire industry environment will gradually move towards the model of licensed financial institutions,” Cheng said.

According to Cheng, in addition to the traditional AML obligations, the new regulations also require qualifications for the management team and incorporate corporate responsibilities such as transaction security, consumer asset protection and information security. 

“For industry participants, these rules establish higher barriers to entry and ongoing operation,” Cheng added. “The new regulations provide stronger legal protection for the development of Taiwan's [crypto] industry, making it more attractive for large investors accustomed to traditional finance to participate.”

Meanwhile, the FSC is mulling a particular law proposal for crypto assets that it plans to submit to the Executive Yuan, Taiwan’s highest administrative organ, in June next year. Local media reported that the FSC intends to complete the draft proposal by the end of this year.

In June, the local crypto sector established an industry association to formulate self-supervisory rules under the government’s guidelines.