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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?
At present, no single set of legal guidelines or laws particularly governs digital currencies in Taiwan. The Monetary Supervisory Fee (FSC) usually characterises Bitcoin and different digital currencies as extremely speculative digital items which might be purchased and offered for revenue. Moreover, the FSC has repeatedly warned residents that digital currencies are extremely speculative and dangerous belongings.
The FSC issued a ruling on 27 June 2019 stating that sure tokens that meet the Howey take a look at will represent a securities token providing (STO). The standards of the Howey take a look at are as follows:
- There’s an funding of cash;
- in a typical enterprise;
- with an expectation of earnings from the funding; and
- the earnings come primarily from the efforts of the issuer or a 3rd social gathering.
Such tokens are handled as securities underneath Taiwan legislation and are topic to all related securities laws, together with the Securities Trade 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. Nevertheless, if the issuance or providing of digital tokens constitutes an STO underneath the Howey take a look at (see query 1.1), the issuer should adjust to present 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 small print 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 answerable for implementing the relevant legal guidelines and laws? What powers have they got?
The FSC is the executive physique answerable for implementing the monetary companies laws that govern companies resembling banks, securities companies, futures companies and insurers. At present, it’s unclear whether or not digital currencies fall inside the supervisory framework of the FSC.
Nevertheless, if the issuance or providing of digital tokens constitutes an STO underneath the Howey take a look at (see query 1.1), such issuance or providing will fall underneath 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 worth volatility of digital currencies and the chance 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 maintain 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. Nevertheless, at any time when cases of suspected fraud or multi-level advertising and marketing scams contain digital currencies, such circumstances are usually investigated for potential violations of prison legislation 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 present physique of legal guidelines (eg, contracts legislation, property legislation)?
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 method of elevating funds whereby firms subject ‘digital items’ resembling digital rights, digital belongings 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 take a look at 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 underneath an present class (eg, digital cash)?
To our information, there are not any particular laws or official authorities opinions on the remedy of stablecoins.
3 Digital currencies market
3.1 Which digital currencies have turn out to be most embedded in your jurisdiction? Does this fluctuate relying on the precise use?
Digital currencies are largely handled as digital items that individuals put money into. At current, Bitcoin is probably the most prevalent and well-recognised digital foreign money in Taiwan.
3.2 What totally different services and products are provided?
Digital foreign money service suppliers in Taiwan usually 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 usually 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 fluctuate 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 are usually not 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.
Apart from that, if the actions of buying and selling platforms contain securities token choices (STO), they are going to be topic to extra laws. Rules governing STOs of underneath NTD 30 million have been issued on 20 January 2020, which embrace compliance guidelines for token issuers and tips on the problem of prospectuses to buyers and different laws underneath 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 underneath the Monetary Know-how Improvement and Modern Experimentation Act earlier than such choices could be made (see query 11.1).
4 Crossover with banking
4.1 How are digital currencies positioned inside the broader banking panorama in your jurisdiction?
On condition that the Monetary Supervisory Fee (FSC) nonetheless views digital currencies as ‘digital items’ slightly than fiat cash, and forbids monetary establishments from offering deposit and alternate companies for digital currencies, there may be little interplay between the banking system and digital currencies. Nevertheless, some native banks nonetheless function fiat cash fee service suppliers for some digital foreign money exchanges.
4.2 What impression might mainstream adoption of digital currencies have on the power to regulate inflation in your jurisdiction?
As this subject requires information of complicated macroeconomic components in Taiwan, we do not need enough experience to offer an opinion.
4.3 What different implications might the mainstream adoption of digital currencies have for the banking system in your jurisdiction (eg, with respect to fee companies)?
There is no such thing as a signal that the adoption of digital currencies may 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 fluctuate 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 are not any related laws or governmental opinions on blockchain know-how.
5.2 What different implications might 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 knowledge safety regime in your jurisdiction and what particular implications does this have for digital currencies?
All knowledge controllers are topic to the Private Knowledge Safety Act (PDPA), together with digital foreign money service suppliers. Pursuant to the PDPA, knowledge collectors and processors should adjust to sure necessities when accumulating private knowledge from people.
Knowledge controllers should additionally implement applicable safety measures to stop private knowledge from being stolen, altered, broken, destroyed or disclosed underneath 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 primary targets are authorities businesses and significant infrastructure suppliers. The precise entities to which it applies are nonetheless underneath dialogue by the competent authorities; however based on a press launch issued by the Govt Yuan, entities resembling vitality firms, healthcare suppliers and main monetary establishments are prone to be designated as vital infrastructure suppliers. Entities which might be thought of vital infrastructure suppliers will likely be topic to the safety and reporting necessities underneath 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 components and conduct common danger assessments.
For buying and selling platforms whose actions contain STOs underneath NTD 30 million, the Taipei Trade has issued related laws with which they have to comply, together with related inside management tips.
As well as, offences resembling 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 inside the scope of the MLCA. Digital foreign money platforms are usually required to undertake buyer due diligence to confirm the id of shoppers and helpful homeowners, and to retain all data obtained from this course of. It’s anticipated that related guidelines and laws governing the implementation of the MLCA by digital foreign money platforms will likely be issued within the close to future.
8 Client safety
8.1 What shopper safety provisions apply to digital currencies in your jurisdiction?
As talked about in query 2.1, digital currencies are seen as ‘digital items’ based on the Monetary Supervisory Fee. Nevertheless, underneath 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, components and elements. Therefore, digital currencies don’t fall inside the scope of the CPA. Additionally it is unclear whether or not digital foreign money service suppliers would qualify as ‘monetary companies enterprises’ underneath Monetary Buyer Safety Act. Because of this, in case of disputes involving digital currencies, prospects can solely search cures underneath civil legislation.
8.2 What different implications might the mainstream adoption of digital currencies have from a shopper perspective?
Digital currencies may very well be seen as different area of interest belongings from a shopper 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?
In accordance with 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 earnings tax must be levied on the transaction charges. As regards the buying and selling of digital currencies, earnings tax must be levied on the earnings from the transaction.
11 Traits and predictions
11.1 How would you describe the present panorama and prevailing traits 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 Improvement and Modern Experimentation Act, which establishes the regulatory sandbox regime, with the goal of selling the event of economic know-how. Taiwan has additionally launched laws on securities token choices, though the necessities are thought of slightly 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 speedy innovation on this area.
12 Ideas and traps
12.1 What are your high suggestions for digital foreign money suppliers searching for 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 strong know-your-customer and anti-money laundering protocols to regulate dangers; and
- retain cheap transaction information to allow them to answer potential inquiries from authorities businesses and legislation enforcement our bodies.
As Taiwan applies the Howey take a look at to securities token choices (STO) (see query 1.1), any token providing inside Taiwan shouldn’t fall underneath the definition of an ‘STO’ underneath the Howey take a look at. 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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