Fintech has been a prominent issue in Taiwan for some time, with recent discussions increasingly focusing on the payment sector and virtual assets.
Payment sector
In Taiwan, traditional remittances and credit card payments typically go through banks. The Electronic Payment Institutions Act (E-payment Act) began regulating online payment activities in 2015. Updated in 2021, it allows e-payment institutions to operate in three main areas: (1) collecting and making payments for real transactions as an agent; (2) accepting deposits of funds as stored value funds; and (3) small amount domestic and cross-border remittance services.
The act also permits e-payment institutions to provide foreign exchange services related to these activities. Additionally, under specific conditions, non-e-payment institutions may apply to offer cross-border remittance services exclusively for foreign workers in Taiwan.
Eddie Hsiung
Partner
Lee and Li
Taipei
Tel: +886 2 2763 8000 ext. 2162
Email: eddiehsiung@leeandli.com
It is important to note for the abovementioned “(1) collecting and making payments for real transactions as an agent”, if the “total balance of funds collected and made by the institution as an agent under its custody” remains under a specific threshold – currently TWD2 billion (USD61.6 million), as set by the Financial Supervisory Commission (FSC) – no FSC licensing is required.
Such operators are called “third-party payment service providers”. According to Taiwan’s amended anti-money laundering (AML) law, these providers must complete Anti-Money Laundering Registration and Service Capability Registration with the Ministry of Digital Affairs before they can offer services.
In addition, the AML law provides that offshore third-party providers are required to establish a local company or branch under the Company Act and complete registration before operating in Taiwan. Non-compliance with these regulations may result in criminal liabilities.
Virtual assets/cryptocurrency
Under Taiwanese law, cryptocurrencies are generally classified into two categories: (1) cryptocurrencies that possess characteristics of securities, known as “security tokens”; and (2) cryptocurrencies that do not exhibit these characteristics, referred to as “non-security tokens”.
Security tokens. According to the FSC, these are defined as tokens that use cryptography, distributed ledger technology or similar mechanisms to store, transfer or exchange value digitally. These tokens must be transferable and meet all of the following investment criteria: (a) involve funds provided by investors; (b) fund a common enterprise or project; (c) create an expectation of profit for investors; and (d) rely primarily on the efforts of the issuer or third parties to generate profits.
The issuance of such tokens is known as a security token offering (STO). In 2020, with FSC authorisation, the Taipei Exchange introduced a set of rules for STOs. Accordingly, STOs can be conducted under their framework for offerings of TWD30 million or less. Key provisions include: (a) the issuer must be a Taiwan-incorporated company limited by shares and cannot be a company listed on the Taiwan Stock Exchange, Taipei Exchange or Emerging Stock Market of the Taipei Exchange; (b) only profit-sharing or debt tokens may be issued; and (c) participation is restricted to “professional investors”, with a cap of TWD300,000 per STO for individual professional investors.
The STO rules also require STO platform operators to obtain a securities dealer licence.
Non-security tokens. Taiwan’s AML framework now includes regulations for virtual asset service providers (VASPs). Such VASPs cover these businesses/services: (a) exchange between virtual currency and fiat currencies; (b) exchange between virtual currencies; (c) transfer of virtual currencies; (d) custody and/or administration of virtual currency or providing relevant instruments for administrating virtual currencies; and (e) participation in and provision of financial services related to the issuance or sale of virtual currencies.
In 2021, the FSC introduced the Regulations Governing Anti-Money Laundering and Countering the Financing of Terrorism for Enterprises of Crypto-asset Platforms and Trading Business (Crypto AML Regulations).
These regulations require operators to implement key measures such as internal control systems, procedures for reporting suspicious transactions, and know-your-customer (KYC) protocols.
Additionally, operators must file a compliance declaration with the FSC, confirming their adherence to AML laws and Crypto AML Regulations. Under the revised AML law, VASPs must complete Anti-Money Laundering Registration with the FSC before offering services.
Offshore VASPs are also required to establish a company or branch in Taiwan, following the Company Act, and complete the same registration process. Failure to comply with these registration requirements may be subject to criminal liabilities.
In response to FTX insolvency and fraud concerns, the FSC issued guidelines for VASPs under the AML law in September 2023.
These guidelines address various issues, some of which are not strictly related to anti-money laundering, such as (a) requirements for virtual asset issuers to publish a white paper on their websites, and (b) custody and segregation of assets between VASPs and their customers.
Additionally, in 2023, several local VASPs collaborated to form a working group with the goal of establishing an industry association, or self-regulatory organisation. This association was officially formed in June 2024 and is currently developing its own self-regulatory framework to govern its members.
Peer-to-peer lending
Currently, Taiwan lacks specific laws or regulations for peer-to-peer (P2P) lending. However, the banking industry’s self-regulatory association has introduced Self-Disciplinary Rules of Business Co-operation between Member Banks of the Bankers Association and Peer-to-Peer Lending Operators. These rules define the areas where banks can work with P2P operators, including services such as fund custody, cash flow services, credit assessment and rating, extending facilities to customers (peer-to-bank model), marketing and advertising, and custody of credit-related documents.
Note that the FSC has clarified in press releases that, for the time being, platform operators facilitating peer-to-peer lending are not subject to its regulation. However, in October 2023, the FSC released guidelines for P2P lending platforms. These guidelines prohibit certain regulated activities, such as deposit-taking and issuing securities, and mandate the implementation of risk control measures.
These measures include requiring real-name verification for lenders and borrowers, controlling fund flows, setting criteria for loan application reviews, and establishing loan amount limits, alongside consumer protection provisions.
Digital-only banking & insurance
In 2018, the FSC introduced regulations for the establishment of digital-only banks, which operate without physical branches. Three applications were submitted to the FSC, all of which were approved in 2019, and these banks began operations shortly after.
In December 2021, recognising growing digital transformation in the insurance sector and the need for innovative products, the FSC outlined a policy for the establishment of digital-only insurance companies. It also set specific requirements for such companies. By the 2022 deadline, only two applications were submitted, with neither approved. Reports indicate that the FSC is considering reopening applications for digital-only insurance companies, with plans for an announcement by the end of 2024.
Regulatory sandbox
To encourage the growth of fintech services and companies, Taiwan introduced the FinTech Development and Innovation and Experiment Act (Sandbox Act) in 2018, allowing fintech businesses to pilot their financial technologies within a regulated, controlled environment.
The Sandbox Act requires applicants to secure approval from the FSC before entering the sandbox for testing. During the testing period, certain regulatory obligations, such as FSC licensing, may be eased. On completion of the experiment, the FSC reviews the outcomes, and if the results are promising, it may explore adjusting existing financial laws and regulations that hinder the adoption of innovative financial practices. However, based on the FSC’s evaluation, participants may still need to obtain appropriate licences or approvals to carry out activities tested in the sandbox.
Looking ahead
Cryptocurrencies appear to be gaining momentum and FSC chair Peng Jin-lung has outlined several key policy objectives. Most significantly, the FSC is considering a dedicated cryptocurrency law, with a draft expected by mid-2025. In response to growing demand for virtual asset custody, the FSC also plans to allow financial institutions to handle virtual asset custody services. To explore the potential for tokenising real world assets (RWAs), the FSC has additionally partnered with the Taiwan Depository and Clearing Corporation (TDCC) and several financial institutions to form the RWA Tokenisation Group, which aims to deepen understanding of RWA tokenisation, discuss practical operations, and address relevant policy and regulatory issues.
Recent reports further indicate that the FSC is exploring the possibility of creating a dedicated law for financing companies. Lending activities have historically not been considered licensed financial services, meaning operators do not need an FSC licence. However, the FSC has engaged an external organisation to research this issue. While such proposed regulation may not directly pertain to fintech, its implementation, if enacted, could impact emerging fintech models such as buy-now-pay-later. Industry participants should stay alert to upcoming regulatory developments in Taiwan.
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