Taiwan’s financial watchdog prepares to test cryptocurrency custody services with local banks

Taiwan’s Financial Supervisory Commission is preparing to implement a pilot program for institutional cryptocurrency custody. The regulatory agency intends to collect applications in early 2025, and three private banks have already expressed interest in participating.

The latest move signifies efforts to promote institutional adoption of crypto in the region.

Crypto Institutional Custody in Taiwan

According to a local media report, institutions participating in the pilot must specify the types of virtual assets they will hold — such as Bitcoin, Ethereum or Dogecoin — and identify whether their services are for platforms, professional investors such as institutions, heritage entities or the general public.

In a press conference held earlier this week, Hu Zehua, Director of Comprehensive Planning of the FSC, emphasized that while some security companies expressed interest, banks are better suited for this role in because of their greater capital reserves and safety considerations.

Zehua also mentioned that the FSC plans to hold a 15-day public consultation before accepting applications for the trial operation of virtual asset custody services.

During this period, the regulator will explain the proposed guidelines and ask for external opinions, which will serve to make the necessary revisions before the official launch. This process is intended to allow the three private banks that have expressed interest in the trial to submit their applications after the review period is over.

Taiwan’s focus on cryptography

The latest development comes amid the Taiwanese government’s growing focus on crypto. The FSC recently introduced a policy that allows professional investors to invest in foreign exchange-traded funds (ETFs) through local brokers, limiting access to professional investors only.

In addition, the FSC updated its anti-money laundering (AML) regulations last week with the aim of boosting oversight of local virtual asset service providers (VASPs). Entities that do not comply will face severe penalties. The new AML measures, effective January 1, 2025, require all crypto companies to register with the government by September 2025.

As reported by CryptoPotato, those who fail to comply could face up to two years in prison or fines of up to 5 million New Taiwan dollars (which is roughly $155,900). Despite AML regulations already in place from July 2021, even fully compliant companies must re-register with the agency to avoid penalties.

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