Taiwan’s Watchdog to Test Crypto Custody with Local Banks

The Financial Supervisory Commission of Taiwan is set to launch a pilot initiative for institutional crypto custody. The regulatory body plans to begin accepting applications in early 2025, with three private banks already signaling their interest in the program.

This recent development underscores efforts to enhance institutional adoption of cryptocurrency in the area.

Institutional Crypto Custody in Taiwan

A report from local media states that participating institutions in the pilot will need to clarify the types of virtual assets they plan to custody—such as Bitcoin, Ethereum, or Dogecoin—and determine if their services will cater to trading platforms, professional investors, high-net-worth individuals, or the general populace.

During a press conference earlier this week, Hu Zehua, the FSC’s Director of Comprehensive Planning, pointed out that while some security firms showed interest, banks are more appropriate for this function due to their significant capital reserves and security factors.

Zehua also indicated that the FSC intends to conduct a 15-day public consultation period before commencing the application process for the trial of virtual asset custody services.

Throughout this timeframe, the regulatory authority will outline the proposed guidelines and seek external feedback, which will inform any needed changes prior to the official implementation. This initiative aims to facilitate the three private banks interested in the trial to submit their applications upon the conclusion of the review period.

Taiwan’s Focus on Crypto

This latest progression occurs as the Taiwanese government intensifies its attention on the cryptocurrency sector. Recently, the FSC rolled out a policy permitting professional investors to invest in foreign crypto exchange-traded funds (ETFs) through local brokers, with access restricted to professional investors only.

Moreover, the FSC revised its Anti-Money Laundering (AML) regulations last week to enhance supervision of local virtual asset service providers (VASPs). Entities not adhering to these regulations will face hefty penalties. The new AML regulations, which take effect on January 1, 2025, require all crypto businesses to register with the government by September 2025.

As reported by CryptoPotato, those who do not comply could face up to two years in prison or fines reaching 5 million New Taiwan dollars (approximately $155,900). Despite existing AML rules from July 2021, even fully compliant firms must re-register with the agency to avoid penalties.