In2019, Taiwan received a favorable status of “regular follow-up” by the third MutualEvaluation Committee of the Asia/Pacific Group on Money Laundering (APG). Afterthat, a follow-up report was submitted every other year. It is expected that afourth mutual evaluation will be conducted in 2030. One of the key points ofTaiwan's 2023 follow-up report was the strengthening of regulation andmonitoring of virtual asset service providers (VASPs). It is foreseeable thatfuture amendments of the Money Laundering Control Act and the Counter-TerrorismFinancing Act and the key areas of relevant policy implementation will behighly related to the management of VASPs.

InMarch 2023, the Financial Supervisory Commission (FSC) was confirmed to beappointed by the Executive Yuan as the competent authority for virtual assetplatforms having financial investment or payment characteristics, and related regulationmechanisms were to be developed by the FSC. However, currently, virtualcurrency trading businesses are not businesses requiring a special license anddo not need to be reviewed by the FSC for license issuance. Neither is there athreshold for minimum capital amount. The FSC indicated that, as the competentand monitoring authority for VASPs against money laundering and terrorismfinancing, it would increase its monitoring gradually.

InSeptember 2023, the FSC announced guidelines for VASPs, emphasizing thesupervision of offshore currency traders. One key point is the prohibition ofVASPs from advertising or soliciting NTD trading businesses within Taiwan'sterritory or to Taiwanese citizens without proper registration under theCompany Act and filing of a statement of compliance with the Money LaunderingControl Act to the FSC. Therefore, offshore VASPs not registered and supervisedby the Taiwanese government are prohibited from soliciting business withinTaiwan. This prohibition extends to situations where the company directly orindirectly solicits business from Taiwanese citizens, even if the solicitationis not conducted within Taiwan's territory. Offshore VASPs engaging in virtualcurrency platforms and trading businesses without registration and supervisionby the Taiwanese government may face criminal and tax liabilities in Taiwan.

It'simportant to note that even if offshore VASPs have a representative office inTaiwan, it does not fulfill the requirements for local administration. Arepresentative office of a foreign company in Taiwan is limited to tasks suchas contract signing, quotation, negotiation, bidding, and procurement on behalfof the foreign company, and not actual business operations. Since advertisingor solicitation of NTD trading businesses within Taiwan's territory or toTaiwanese citizens constitutes business operation activities in Taiwan,offshore VASPs should refrain from such activities unless the company (or abranch of it) is registered with the competent authority in Taiwan. In otherwords, if an offshore VASP (or its branch) is not registered as a company inTaiwan or only has a representative office registered in Taiwan but conductsbusiness operation activities in Taiwan, it must still pay business tax andincome tax on those activities in accordance with the law.

Foroffshore VASPs entering Taiwan to conduct businesses such as virtual currencyplatforms and trading, it's crucial to adhere to laws and regulationsconcerning money laundering prevention, terrorism financing, and theaforementioned VASP guidelines. Furthermore, with the establishment of a VASPassociation in Taiwan in the future, they should register with suchassociation, establish self-regulatory norms in line with the VASP guidelines,and ensure compliance with these norms.

Thisarticle was published in the Expert’s Commentary Column of the CommercialTimes. https://www.ctee.com.tw/news/20240327700113-431305

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