Summary of the Draft Virtual Asset Service Law: Stablecoins, Licenses, and Penalties Explained

Author: Crypto City

• This article was updated and revised on 2026/4/8 to the draft version approved by the Executive Yuan

Virtual Asset Service Law Draft Passes the Executive Yuan, a Quick Overview Taiwan’s cryptocurrency industry finally enters a clear regulatory era! Following the Financial Supervisory Commission’s initial draft released last year, the Executive Yuan approved the amended draft of the Virtual Asset Service Law in early April this year, which will be sent to the Legislative Yuan for review. The goal is to promote healthy development and management of Taiwan’s virtual asset businesses, protect traders’ rights, and foster financial technology innovation. Compared to the 2025 version, the version approved by the Executive Yuan is stricter in penalties and management! After reading through the complex legal provisions, Crypto City has summarized four key points to help readers quickly understand. For the latest and complete draft content, you can view this PDF file of the “Virtual Asset Service Law.”

Four Key Points of the Virtual Asset Service Law Draft Point 1: Classification of Virtual Asset Service Providers and License Application The draft clearly states that virtual asset service providers must obtain permission from the competent authority according to their type, and be issued a license (permit) before operating. Businesses without permission and licenses are not allowed to operate any virtual asset services. Additionally, the new draft explicitly states that businesses “must not operate unless they join an industry association,” enforcing industry self-discipline. Traditional financial institutions, after obtaining permission, can also “operate concurrently” in virtual assets, with some regulations exempted. The Financial Supervisory Commission classifies virtual asset service providers into 7 categories:

• Virtual Asset Exchange Operators: Engage in the exchange of virtual assets with New Taiwan Dollars, foreign currencies, or currencies issued in Mainland China, Hong Kong, or Macau, or related services, or exchange between virtual assets and related services.
• Virtual Asset Trading Platform Operators: Virtual asset exchange operators managing centralized trading markets.
• Virtual Asset Transfer Operators: Engage in virtual asset transfers and related services, including virtual asset payment services.
• Virtual Asset Custodians: Operate custody or management of virtual assets or tools used to control virtual assets, and related services.
• Virtual Asset Underwriters: Engage in issuance or sale of virtual assets and related services.
• Virtual Asset Lending Operators: Operate virtual asset transfer and repayment or delivery of the same or higher quantity or value of virtual assets, and related services.
• Other Virtual Asset Service Providers: Provide other virtual asset services approved by the competent authority.

Image source: Crypto City Production | Summary of Key Points in the Virtual Asset Service Law Draft: Types of Virtual Asset Service Providers, License Applications

License (Permit) Application Deadline Regarding the transition period most concerned by industry players, the Executive Yuan version provides clearer regulations: Existing businesses that have completed anti-money laundering registration must apply within 9 months after the law takes effect, and obtain a license within 18 months. Those who fail to apply or pass the review by the deadline cannot continue operations. Overseas Virtual Asset Service Providers’ Regulations For overseas virtual asset service providers (such as foreign crypto exchanges), if they want to establish branches in Taiwan, they must obtain approval from the competent authority and be issued a license, and register a company or branch in Taiwan.

Point 2: Management Framework for Virtual Asset Service Providers The FSC also referenced regulations from the EU’s MiCA, Japan, Singapore, and other regions, imposing strict standards on virtual asset service providers. Crypto City summarizes the following key points: Total Liabilities The total liabilities of a virtual asset service provider to outsiders must not exceed a certain multiple of its net worth; its current liabilities must not exceed a certain percentage of its current assets. However, financial institutions operating concurrently are exempt from these limits, with the multiples and percentages set by the competent authority. Internal Controls and Administrative Penalties Service providers should establish internal control systems and cybersecurity standards. Poor internal controls, failure to report financial statements legally, or failure to implement listing and delisting reviews will face administrative fines ranging from NT$300k to NT$6 million, which can be imposed per violation. Customer Asset Custody Assets held for customers by virtual asset service providers, separate from their own assets, should be managed independently according to the regulations of the competent authority. Customer assets include virtual assets, legal currency, and other assets. Creditors of the service provider cannot claim or exercise rights over customer assets. In bankruptcy, customer assets do not belong to the bankruptcy estate (note). Except for customer instructions, legal offsetting of debts, or approval by the competent authority, customer assets cannot be used. Virtual asset custodians’ customer assets belong to the customers and cannot be transferred by agreement. Mixing customer assets with the service provider’s own virtual assets is prohibited.

• Note: The bankruptcy estate refers to all assets owned by the company before the conclusion of bankruptcy proceedings, including movable and immovable property, claims, etc.

Customer Statutory Currency Deposit Accounts With customer consent, virtual asset service providers may hold statutory currency involved in virtual asset transactions in a dedicated deposit account at a financial institution of the same currency, and must deliver the currency to a trust or obtain full performance guarantees from banks. For holding customer legal currency, the reconciliation rules of virtual asset custodians apply. Periodic Review Reports Virtual asset service providers should periodically report and announce financial reports audited or reviewed by accountants to the competent authority. The procedures, announcement content, and formats are determined by the authority. Virtual asset custodians should establish regular reconciliation measures for customer assets, appoint accountants to issue reports, and report and announce to the authority. Virtual Asset Listing and Delisting Review Virtual asset exchange operators should publish the white paper of the virtual assets they offer for exchange. If a virtual asset does not have an issuance white paper prepared and announced according to the regulations, the exchange operator generally cannot provide exchange services for that virtual asset. Virtual asset trading platform operators should establish review standards and procedures for listing and delisting. For virtual assets not approved by the competent authority, the platform cannot provide trading services involving those assets.

Image source: Crypto City Production | Summary of Key Points in the Virtual Asset Service Law Draft: Virtual Asset Service Provider Management and Compliance Framework

Point 3: Regulations on Stablecoin Issuance in Taiwan If an entity wants to issue stablecoins within Taiwan, it must obtain approval from the competent authority, which will consult with the Central Bank. The Executive Yuan’s version imposes very strict red lines on stablecoins:

• Prohibition of interest and yield payments: Stablecoin issuers cannot pay any form of interest or yield, and must issue and redeem at face value, similar to the current US stablecoin regulations under the “Tether Act.”
• Reserve requirements and penalties from the Central Bank: Issuers must maintain sufficient reserve assets and keep them separately. If reserves are insufficient, the Central Bank will impose a penalty of “5% annual interest” on the shortfall.
• Regarding overseas stablecoins: If virtual asset service providers offer services involving stablecoins not issued in Taiwan, they may still be traded in Taiwan if approved by the competent authority.

Point 4: Eight Major Penalty Regulations, Heavy Penalties for Fraud and Market Manipulation The draft of the Virtual Asset Service Law imposes severe penalties for behaviors such as fraud and market manipulation. The Executive Yuan version significantly enhances practical enforcement mechanisms:

• Fraud or market manipulation: Imprisonment of 3 to 10 years, with fines ranging from NT$10 million to NT$200 million.
• Self-reporting and confession for reduced penalties: For fraud or manipulation, if offenders surrender or confess during investigation and compensate victims fully within 6 months, their sentences may be reduced or waived, facilitating law enforcement tracing.
• Operating without permission or issuing stablecoins: Up to 7 years imprisonment, with fines up to NT$100 million.
• Misuse of customer assets: Responsible persons face up to 5 years imprisonment and fines up to NT$50 million.
• Corporate penalties: If employees commit crimes such as unlicensed operation or illegal asset use, the company (legal entity) will also be fined equally, with maximum fines of NT$100 million or NT$50 million.
• Enhanced labor service penalties: Fines exceeding NT$50 million increase labor service detention to up to 2 years; exceeding NT$100 million increases it to up to 3 years.
• Confiscation of criminal proceeds: If proceeds are obtained by the offender or third parties, they shall be confiscated in addition to being returned to victims.
• False concealment and misuse of names: Filing false applications or reports can result in imprisonment up to 3 years or fines up to NT$2.4 million; non-service providers using similar names face imprisonment up to 1 year or fines up to NT$1.2 million.

Image source: Crypto City Production | Summary of Key Points in the Virtual Asset Service Law Draft: Supervision and Penalties for Virtual Asset Service Providers

Controversies over the Virtual Asset Service Law: Can it Balance Protection and Innovation? The FSC states that, given the recent regulations issued by the US, EU, Japan, South Korea, and Hong Kong regarding virtual assets, an international consensus on virtual asset regulation is gradually forming. To promote sound development of Taiwan’s virtual asset industry, protect investors, and foster financial technology innovation, establishing a dedicated law is necessary. This draft of the Virtual Asset Service Law, after revisions, was finally officially approved by the Executive Yuan. The industry is currently discussing it actively. Some positive opinions believe that the regulations will help the industry mature, while others worry that overly strict rules may stifle innovation. However, it is worth noting that the Executive Yuan version also specifically added provisions for “Innovation Experiments” and “International Cooperation,” explicitly allowing businesses to apply for innovation sandbox programs and authorizing authorities to conduct cross-border information exchanges. Overall, the birth of the Virtual Asset Service Law signifies Taiwan’s cryptocurrency industry is moving from an early pioneering stage into a regulated, compliant era. Industry players will inevitably face a period of adjustment and pain.

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