Taiwan’s regulatory framework for Virtual Asset Service Providers (VASPs) is evolving—from an initial phase based on compliance declarations, through a transition to a registration system, and soon toward a formal licensing regime. This progression reflects the Financial Supervisory Commission’s (FSC) increasing measures to manage market risks in the virtual asset space, while aligning more closely with international regulatory standards. Below is a detailed analysis of each phase, with a focus on the enhanced emphasis on internal audit and internal control, and the significance of transitioning to a licensing model.<img src="https://storage.googleapis.com/kryptogo-website.appspot.com/public/cms/VASP_visual_selection_1_c2e4cc4f41/VASP_visual_selection_1_c2e4cc4f41.png" alt="解析台灣 VASP 監管演進：從法遵聲明到登記制再到特許制的過渡 - visual selection (1).png" width="1377" height="1132"><hr><h4>Phase One: Compliance Declaration (2021–2024)</h4>Background and DefinitionOn June 30, 2021, the FSC issued the "Regulations on Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) for Virtual Currency Platforms and Trading Businesses," which required VASPs to submit a compliance declaration regarding AML and CFT measures. This phase was characterized by self-regulation, aiming to provide flexibility during the early stages of market development, relying primarily on the providers' own declarations of compliance.Key Requirements<ol><li>Self-Declaration: Providers were required to complete a declaration form confirming adherence to the AML laws and related regulations.</li><li>Basic Information Submission: This included details such as the company name, responsible persons, ultimate beneficial owners, and designated AML personnel (refer to Attachment 2: Declaration Information Form).</li><li>Internal Control Check: Submission of an internal control and audit checklist for AML/CFT, which was subject to review by an external auditor (see Attachment 3).</li></ol>Characteristics and LimitationsDuring the compliance declaration phase, regulatory oversight was limited to self-reporting and basic data submission, without stringent external audits. This approach made it challenging for regulators to verify the actual effectiveness of internal controls, as the process largely depended on the providers’ own adherence to the stated policies.<hr><h4>Phase Two: Registration System (Effective from 2024)</h4>Background and DefinitionIn July 2024, the Taiwanese legislature passed an amendment to the AML law. Subsequently, on November 26, 2024, the "Regulations on the Registration of Businesses and Individuals Providing Virtual Asset Services for AML Compliance" were issued, with the registration system taking effect on November 30, 2024. This system elevates the oversight from self-declaration to formal registration, requiring VASPs to register with the FSC and undergo periodic supervision.Main ProvisionsThe registration system significantly raises compliance standards, with a pronounced focus on the practical implementation of internal audit and internal control:<ul><li>Comprehensive Application Documents (Article 5)<ul><li>Submission of corporate bylaws, operational guidelines, shareholder registers, and information on responsible persons and ultimate beneficial owners.</li><li>A complete AML/CFT internal control and audit framework must be provided, along with an audit opinion from an external accountant.</li></ul></li><li>Internal Control and Audit Requirements (Article 10)<ul><li>Providers must ensure that their internal control systems are robust and effectively implemented, covering aspects such as customer due diligence (CDD) and transaction monitoring.</li><li>Different types of VASPs (exchanges, trading platforms, transfer agents, custodians, underwriters) must establish tailored internal control measures. For example, trading platforms are required to comply with Article 19’s guidelines for asset listing reviews, while custodians must adhere to wallet management protocols specified in Article 26.</li></ul></li><li>Regular Reporting and Supervision<ul><li>VASPs are required to periodically report their operational status to the FSC and undergo audits conducted by the FSC or its designated agencies.</li><li>Non-compliance or failure to register can result in penalties of up to 2 years imprisonment or a fine of up to NT$5 million (in accordance with Article 13 of the AML law).</li></ul></li></ul>Transition from Compliance Declaration<ul><li>From Self-Declaration to Mandatory Registration: Instead of merely relying on self-declaration, providers must now submit comprehensive documentation and undergo regulatory review.</li><li>Strengthened Internal Controls: The move from a checklist-based approach to a full-fledged internal control system—validated by professional accountants—marks a significant upgrade in regulatory rigor.</li><li>Enhanced Oversight: The FSC now has the authority to proactively audit and impose administrative sanctions on non-compliant entities, thereby addressing the oversight shortcomings of the earlier phase.</li></ul>Significance of the Registration SystemBy emphasizing internal audits and controls, the registration system aims to establish a solid compliance foundation for VASPs, enhancing market transparency and paving the way for the subsequent introduction of a formal licensing regime.<hr><h4>Phase Three: Licensing (Expected Post-2025)</h4>Background and OutlookThe FSC plans to propose a dedicated VASP law in June 2025, introducing a licensing system that will require providers to obtain formal operating licenses. This phase is expected to draw on international standards, such as the European Union’s Markets in Crypto-Assets Regulation (MiCA), to further refine the regulatory framework for virtual assets.Anticipated Provisions<ul><li>License Requirements: Establishment of minimum capital thresholds, qualification criteria for responsible persons, and stringent corporate governance standards.</li><li>Differentiated Oversight by Business Type: Specific regulatory measures will be tailored for exchanges, trading platforms, transfer agents, custodians, and underwriters.</li><li>Enhanced Consumer Protection and Stablecoin Management: Measures will include asset segregation, mandatory disclosure of information, and dual regulation for banks issuing stablecoins.</li><li>Stricter Penalties: Operating without a license may result in penalties of up to 7 years imprisonment and fines of up to NT$20 million.</li></ul>Differences from the Registration System<ul><li>From Registration to Licensing: The licensing model requires providers to secure formal approval, akin to traditional financial institutions.</li><li>Higher Standards: There will be stricter capital, governance, and internal control requirements compared to the registration phase.</li><li>International Alignment: Adopting regulatory practices in line with FATF recommendations and global standards is expected to enhance the competitiveness of Taiwan’s virtual asset market on the international stage.</li></ul>Importance of the TransitionServing as a critical bridge between self-regulation and formal licensing, the registration system not only reinforces internal audits and controls but also prepares providers for the higher standards of a licensing regime. The eventual implementation of a licensing system is anticipated to improve market stability, attract international investment, and more effectively combat money laundering and terrorism financing risks.<hr><h4>Conclusion</h4>The evolution of Taiwan’s VASP regulation—from self-declaration to a structured registration system and ultimately to a comprehensive licensing regime—demonstrates a progressive and internationally aligned approach to virtual asset oversight. The registration phase, with its rigorous internal audit and control requirements, significantly enhances compliance and market transparency. As the move toward licensing unfolds, Taiwan is poised to strike a balance between innovation and stability, potentially becoming a model for virtual asset regulation in Asia.

Taiwan’s regulatory framework for Virtual Asset Service Providers (VASPs) is evolving—from an initial phase based on compliance declarations, through a transition to a registration system, and soon toward a formal licensing regime. This progression reflects the Financial Supervisory Commission’s (FSC) increasing measures to manage market risks in the virtual asset space, while aligning more closely with international regulatory standards. Below is a detailed analysis of each phase, with a focus on the enhanced emphasis on internal audit and internal control, and the significance of transitioning to a licensing model.

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