Taiwan’s Legislative Yuan passed the Virtual Asset Service Act on June 30, establishing a licensing framework that will require stablecoin issuers to maintain full reserves, use domestic trust custody, undergo regular audits, and refrain from paying yield to token holders.
The law creates a formal regulatory pathway for virtual asset service providers (VASPs) under oversight by Taiwan’s Financial Supervisory Commission (FSC). Stablecoin issuers and other VASPs must obtain FSC approval before operating and implement internal controls, cybersecurity standards, and business continuity measures. Violations carry steep penalties: up to NT$100 million in fines and up to 7 years imprisonment for illegal VASP operations or unauthorized stablecoin issuance. Fraud or market manipulation carries fines of NT$10 million to NT$200 million and prison sentences of 3 to 10 years.
The licensing requirement represents a shift from Taiwan’s previous anti-money laundering registration regime for virtual asset providers. Existing VASPs have 12 months from the law’s effective date to apply for licenses and 21 months to obtain formal approval. The FSC will set secondary rules governing the licensing process, though
A core structural requirement protects stablecoin reserve assets from general creditor claims if an issuer enters bankruptcy. The no-yield rule prohibits issuers from paying interest or other returns to token holders, a restriction intended to prevent stablecoins from functioning as deposit products.
Taiwan previously established a pilot program allowing banks to custody digital assets and explored a pathway for bank-issued stablecoins. The new law does not guarantee issuance rights to banks, though bank-supervised infrastructure creates practical advantages for applicants.
The stablecoin sector globally is dominated by USDT and USDC, which together represent the majority of the $292.38 billion global stablecoin market. Taiwan’s reserve and custody requirements will likely apply to these issuers if they wish to operate in the jurisdiction.
The Executive Yuan drafted the bill in April before the Legislative Yuan passed it on third reading on June 30.
