Statistics shows, in 2021, the amount of money laundered by cybercriminals using cryptocurrencies was as high as US$8.6 billion. This number is 30% higher than the number for 2020. It is conservatively estimated that the total amount of money laundered by cybercriminals through cryptocurrency platforms since 2017 has exceeded US$33 billion.

Take 2021 as an example. Among the US$8.6 billion of money allegedly laundered, 17% was performed through non-traditional banking platforms, which were not as highly regulated as traditional banks. Through cryptocurrency technology, most of these non-traditional banking platforms enable a large amount of cash flow to decentralized banking recipients to evade the relevant legal obligations, such as KYC (Know Your Customers), which is a mandatory verification procedure carried out by financial institutions with the goal of minimizing illegal activities.

At this current time of rapid development of information and communication technologies (ICT), technologies such as mining, high-risk exchanges or mixers have been evolved and matured on the basis of current cryptocurrency technologies. More and more businesses are joining in this new wave of the Internet. However, investment fraud mainly based on crypto-assets have become one of the primary types of fraud globally. Without proper regulatory supervision, virtual currency trading platforms are very likely to become channels for criminals to participate in new types of cyber-related crimes so that the subsequent loss of related social costs, as well as public money spent on combatting crimes, will be extremely difficult to estimate.

With respect to the above, the Taiwan Financial Supervisory Commission (“FSC”) updated the “List of Enterprises Handling Virtual Currency Platform or Transaction That Have Completed Declarations on Anti-Money Laundering Compliance” on March 24, 2022. There were altogether 14 companies that participated. The Banking Bureau of the FSC indicated all of the 14 companies have completed declarations on anti-money laundering compliance. Under the framework of the current “Money Laundering Control Act,” “Counter-Terrorism Financing Act” and relevant authorized ordinances and interpretation rulings, these companies have the legal obligations to implement anti-money laundering measures as provided under the “Money Laundering Control Act” and the “Regulations Governing Anti-Money Laundering and Countering the Financing of Terrorism for Enterprises Handling Virtual Currency Platform or Transaction.”

Currently, there is no competent regulatory agency over Taiwan’s cryptocurrency companies. The FSC could only encourage said companies to comply with the relevant enacted anti-money laundering laws. Companies engaging in virtual currency transactions are thus not under any pre-approval or certification by the FSC. This shows that said supervisory power upon cryptocurrency companies in Taiwan is still lacking. Specifically, in the case of BTMs (Bitcoin ATMs), which people could often see on the streets in Taiwan, about ninety (90%) percent of the companies operating BTMs are found involved in fraud and/or money-laundering activities (in most cases, companies are either the defendants or witnesses). Regardless the government is already on the alert regarding the circumstance, there are no clear regulatory measures in action imposed by any agency. It is accordingly necessary for the government to speed up its regulatory movements toward such crimes.

Taiwan is one of the founding members of the Asia-Pacific Group on Money Laundering (APG), and is also the first Asian State promulgating a legislation specifically targeting money-laundering prevention. On December 2, 2021, in an evaluation committee of APG, Taiwan was retroactively promoted to the most favorable category of "regular follow-up." This shows that Taiwan’s great efforts from both the public and private sectors in promoting money-laundering prevention have been recognized in the international community. Nevertheless, at the moment of rapid development of cryptocurrency technologies, how Taiwan could encourage broad applications of ICT while fulfilling its international legal obligations as a member of APG poses challenges to the wisdom of the policymakers in Taiwan.

(This article was published in the Expert’s Commentary Column of the Commercial Times：https://view.ctee.com.tw/monetary/40551.html）