Since the advent of Bitcoin, Taiwan has wondered whether to regulate or liberalize cryptocurrency, the digital tokens backed up by transaction ledgers rather than monetary authorities. Regulation could head off financial crimes and protect established banks worried about a loss of business. Liberalization would nurture a domestic financial technology sector, timely as Taiwan’s signature high-tech hardware gives up ground to foreign firms.
Today the government and ruling party-dominated legislature show early signs of veering toward liberalization. That course would mean making it easier to trade Bitcoin, Litecoin and other cryptocurrency, good for a fintech sector that has begun flourishing even without clear rules.
“There needs to be a whole new set of frameworks and narratives to position crypto and its underlying technology blockchain as the strength that Taiwan can develop,” says Jason Hsu, a minority party lawmaker who is pushing regulators and other legislators to approve a “playbook” on cryptocurrency. “Once that idea is instilled in their minds, I think we will see a quick switch happening.”
History of hesitation
Taiwan now takes a “neutral” view on cryptocurrency, a publicist with government regulator the Financial Regulatory Commission said for this post Thursday. But others in government hope to make more of it, Hsu says based on chats with high-level officials and debates in parliament.
It’s illegal to solicit money from the public via digital security tokens and effectively impossible to open a digital currency bank account, Hsu has found.
But other uses of cryptocurrency are not expressly illegal. Two Taiwan-based platforms and an estimated 25,000 local users already trade it. Some major banks are developing their own schemes, the lawmaker says. Fintech startups including a cryptocurrency wallet firm are also popping up in Taiwan. Younger people want to do more with crypto, Hsu says.
Officials worry that cryptocurrency might enable financial crime, defy taxation, or hobble Taiwan’s conventional banks, Hsu says. The Financial Supervisory Commission warned of “risk” in December because of price volatility in public cryptocurrency trading.
In 2015 the commission’s ex-chairman Tseng Ming-chung called the currencies illegal, particularly Bitcoin ATMs. But the opinions were just his own, recalls John Eastwood, a partner with Eiger Law in Taipei. “Tseng’s declarations about Bitcoin, despite never being supported or acted upon by the commission, have made their way into a lot of news reports that didn’t catch that Tseng was just saying his own opinions,” he says.
Early signs of change
In October 2017, today’s commission Chairman Wellington Koo pledged at a joint cabinet-parliament session to pursue a friendlier “stance” on development of cryptocurrency and its public ledger blockchain, the FinTech Law Blog reports.
Two months later, parliament approved the Act on Financial Technology Innovations and Experiments to let fintech startups including cryptocurrency developers avoid regulations that apply to older firms. The regulations remove fines for any cryptocurrency firms found violating certain financial rules, Taiwanese media outlet Business Next reports. Startups would need to apply one by one, starting next month, to qualify for the protections, the commission spokesperson says.
But legislators will wait for cues from government before considering any regulations that cover cryptocurrency itself, Hsu says. It probably won’t get parliamentary support in the first half of 2018, so lawmakers are talking this month about how to issue “guidelines” on cryptocurrency, he says. Guidelines would clarify what’s OK and not before any formal regulation can pass, Hsu says.
Regulatory tightening overseas
Taiwan will not go the direction of China and South Korea, which last year banned cryptocurrency fundraisers called initial coin offerings (ICOs), Koo told the joint session in October.
China is prepping to tighten regulations that ban ICOs and cryptocurrency exchanges, the state-run newspaper China Daily online said in February. Its measures would increase monitoring of cryptocurrency accounts and step up supervision of foreign currency flows in overseas ICOs. South Korea took measures January 30 to ban anonymous trading on domestic exchanges, and it stopped all trade by foreigners. Officials in India are fast-tracking a law to regulate the trade.
More on Forbes: China Serious About Ending ICOs, Cryptocurrency Exchanges
Japan, by contrast, last year overtook China as the biggest Bitcoin market in the world, news source CryptoAnalyst says. It says Japan’s trade comes to 58% of the global volume. Japan declared Bitcoin legal tender in April last year on its way to becoming a world crypto-hub. Singapore also allows use of cryptocurrency but regulates the platforms to stop financial crimes.
Balance between risk and opportunity?
Guidelines in Taiwan might seek a balance between cryptocurrency “innovation” and protecting consumers from “predatory practices,” Eastwood suggests.
“As with any new technology, there are always people who want to see how far they can take the concept,” he says. “Volatility for cryptocurrencies has been a concern for a long time, and governments are concerned about some of the pump-and-dump tactics that they’ve been seeing.”
Officials in Taiwan may have drafted a “some version of a guideline” already,” the lawmaker says. “I just got back from the Silicon Valley and everywhere you go people are talking about crypto and blockchain. It’s just crazy,” Hsu says. “Our regulatory authorities really need to get out there and figure out what’s going on.”
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