General legal and regulatory framework

Legal framework

What legal framework governs cryptoassets? Is there specific legislation governing cryptoassets and businesses transacting with cryptoassets?

At the time of writing, except for certain rulings and the proposed regulations governing security token offerings (STO), no Taiwanese laws or regulations have been promulgated or amended to formally regulate virtual currencies, cryptocurrencies or any other types of cryptoasset

Government policy

How would you describe the government’s general approach to the regulation of cryptoassets in your jurisdiction?

Taiwan’s government is planning new (or amended) regulations for cryptoassets that have the nature of securities (ie, security tokens); however, the government seems to have no intention to establish any new rules for cryptoassets that are not securities, such as utility tokens. 

Regulatory authorities

Which government authorities regulate cryptoassets and businesses transacting with cryptoassets?

In Taiwan, the Financial Supervisory Commission (FSC) is the government body regulating all financial products and services. The Securities and Futures Bureau, one of the bureaux established under the FSC, is the government authority regulating tokens with the nature of securities (ie, security tokens). For the types of security token offering (STO) that will be permitted under the proposed STO regulations, the FSC also authorises the Taipei Exchange, one of the two securities exchanges in Taiwan, to establish and enforce further rules and regulations governing STOs.

In addition, depending on their structure, cryptoassets with the nature of electronic payment may also be regulated by the Banking Bureau under the FSC.

With respect to cryptoassets that do not have the nature of securities or are not deemed financial products or services, the relevant government authorities depend on the nature of such assets. For example, if no other regulated activities are involved, it is likely that the Ministry of Economic Affairs, which is the competent authority for general corporate matters, may be deemed the competent government authority for such assets.

Regulatory penalties

What penalties can regulators impose for violations relating to cryptoassets?

Criminal liabilities may apply to violation of securities or banking laws where the cryptoassets are considered securities or financial services or products. 

For example, where certain cryptoassets are deemed 'securities' under Taiwan’s Securities and Exchange Act, failure to comply with the filing obligation under the act or the relevant regulations for STOs may be subject to imprisonment of no more than five years and/or a criminal fine of no more than NT$15 million.

Court jurisdiction

Which courts have jurisdiction over disputes involving cryptoassets?

The ordinary courts will have jurisdiction over disputes involving cryptoassets.

Legal status of cryptocurrency

Is it legal to own or possess cryptocurrency, use cryptocurrency in commercial transactions and exchange cryptocurrency for local fiat currency in your jurisdiction?

With respect to cryptocurrencies without the nature of securities or any other financial products of services, the current regulatory regime of Taiwan imposes no restriction or prohibition on owning or possessing such cryptocurrencies, using them in commercial transactions and exchanging them for fiat currency in Taiwan.  

Cryptocurrencies with the nature of securities may be owned and exchanged for fiat currency in Taiwan, subject to the proposed STO regulations. However, using such cryptocurrencies in commercial transactions is not permitted as the proposed STO regulations do not allow use of security tokens to purchase general goods and services.    

Fiat currencies

What fiat currencies are commonly used in your jurisdiction?

The national fiat currency of Taiwan is the New Taiwan Dollar; it is the only recognised national currency that may be used for purchasing goods and services in Taiwan.

Industry associations

What are the leading industry associations addressing legal and policy issues relating to cryptoassets?

The Blockchain and Cryptocurrency Self-Regulatory Organisation and the APAC Blockchain Industry Self-Regulatory Alliance are the two self-regulatory organisations generally known in the cryptocurrency and blockchain industry in Taiwan. These associations were established in 2018 and each has its own self-regulatory guidelines. Industry participants are not legally obligated to join any of these organisations.

In addition, in July 2019 the National Development Council established the Taiwan Blockchain Alliance, with members including market participants in the blockchain industry, academic institutions and non-profit organisations. The main role of this group is to act as an intermediary between the public and private sectors so that market participants can convey their thoughts, advice and suggestions to the regulators.

Cryptoassets for investment and financing

Regulatory threshold

What attributes do the regulators consider in determining whether a cryptoasset is subject to regulation under the laws in your jurisdiction?

Generally speaking, the regulators examine the nature of a cryptoasset, focusing in particular on whether such asset is a security or a financial service or product.

On 30 December 2013 the Central Bank of the Republic of China (Taiwan) and the Financial Supervisory Commission (FSC) released a joint press release outlining the government’s position on bitcoin. The two authorities hold the view that bitcoin is not a 'currency', but instead is a highly speculative digital 'virtual commodity'. In another FSC press release issued in 2014, the FSC ordered that local banks neither accept bitcoin as a payment method nor provide any other services related to bitcoin (eg, exchange of bitcoins for fiat currency). The FSC issued another press release on 19 December 2017 in which it reiterated the government’s positions as specified in the previous press releases mentioned above. Bitcoin is still considered to be neither 'legal tender' nor a 'currency' nor a generally accepted 'medium of exchange' under the current regulatory regime in Taiwan; instead, bitcoin is deemed to be a digital 'virtual commodity'. Even though the government’s press releases mentioned only bitcoin, the authors believe that any other virtual currencies/cryptocurrencies of a nature and characteristics similar to those of bitcoin will also be considered 'virtual commodities'.

In addition, the generally considered core legal issue in relation to virtual currencies/cryptocurrencies other than bitcoin is whether the securities legislation applies – that is, whether an initial coin offering (ICO) or any other investment activities regarding virtual currencies/cryptocurrencies would be considered issuing 'securities' under Taiwan's current securities law regime. On 3 July 2019 the FSC officially announced the criteria for determining whether currencies/cryptocurrencies with the nature of securities shall constitute 'securities' under Taiwan's Securities and Exchange Act.

Investor classification

How are investors in cryptoassets classified and treated differently?

Security tokensPursuant to the draft security token offering (STO) regulations proposed by the FSC, only 'professional investors' are eligible for STOs, and if the professional investor is a natural person, the maximum subscription amount is NT$300,000 for each STO. Under the current regulatory regime, a natural person is generally qualified as a professional investor if he/she may provide a proof of assets of at least NT$30 million and has sufficient professional knowledge and trading experience.

Other cryptoassetsThere exist no rules in relation to the classification of investors or treatments for different investors with respect to cryptoassets other than security tokens.

Initial coin offerings

What rules and restrictions govern the conduct of, and investment in, initial coin offerings (ICOs)?

In 2017 the FSC, in response to the rising size of ICOs and other investment activities regarding virtual currencies/cryptocurrencies, indicated its views that:

  • an ICO refers to the offer and sale of virtual commodities (eg, digital interests, digital assets or digital virtual currencies) to investors. Whether the issue of an ICO token would be deemed 'securities' under Taiwan’s Securities and Exchange Act would depend on the relevant facts of each individual case. When an ICO token has the nature of securities, its offering will be deemed a securities offering, thus subject to the Securities and Exchange Act; and
  • where the issuer of virtual currencies or an ICO makes any misrepresentations and/or promised unreasonably high returns to attract investors, the issuer would be deemed to have committed fraud or conducted illegal fundraising.

Under the current regime, the offer and sale of securities in Taiwan, whether through public offering or private placement, are regulated activities and shall be conducted in accordance with the Securities and Exchange Act, its related regulations, as well as relevant rulings issued from time to time by the FSC. Given this, cryptocurrencies that have the nature of securities (and should therefore constitute 'securities' under the Securities and Exchange Act) should be subject to the Securities and Exchange Act, as well as the proposed regulations on STOs to be officially promulgated by the FSC and the Taipei Exchange (TPEx).

With respect to cryptoassets that do not have the nature of securities or are not deemed financial products or services, which authorities will be competent will depend on the nature of such assets and the applicable rules and restrictions will also depend on the cryptoassets’ nature. For example, if the assets are designed to be used for electronic payment, such assets may then be subject to the rules and restrictions under the relevant banking or payment laws. By contrast, if the assets are not related to any regulated businesses or activities, the general principles under Taiwan's Civil Code and/or Consumer Protection Act shall then be applicable.

Security token offerings

What rules and restrictions govern the conduct of, and investment in, security token offerings (STOs)?

The FSC issued a ruling on 3 July 2019 to officially define ‘security tokens’ as a type of securities; it also issued a press release on 27 June 2019 to illustrate the proposed regulations on STOs. Below is a summary of the FSC’s position.

Definition of ‘security tokenVirtual currencies with the nature of securities (security tokens) refer to tokens that:

  • utilise cryptography, distributed ledger technology or other similar technologies to represent their value that can be stored, exchanged or transferred through digital mechanism;
  • are transferable; and
  • encompass all of the following attributes of an investment:
  • funding provided by investors;
  • providing funding for a common enterprise or project;
  • investors expecting to receive profits; and
  • profits generated primarily on the efforts of the issuer or third parties.

Key points of STO regulationsThe FSC contemplates the application of different regulations on STOs below or above the threshold of NT$30 million. An STO of NT$30 million or less ('exempted STO') should comply with the proposed STO regulations as stated below and the filing obligation under the Securities and Exchange Act may be exempted; an STO above NT$30 million must first apply to be tested in the 'financial regulatory sandbox' pursuant to the Financial Technology Development and Innovative Experimentation Act and, in case the experiment has a positive outcome, its offering may then be conducted pursuant to the Securities and Exchange Act.

For exempted STOs, key points of the FSC's proposed regulations are outlined below.

Regulations on issuance (primary market):

  • Qualifications of the issuer – the issuer must be a company limited by shares incorporated under the laws of Taiwan and not a company listed on the Taiwan Stock Exchange or TPEx or traded on the Emerging Stock Market.
  • Eligible investors and amount limits – only 'professional investors' are eligible for STOs; where the professional investor is a natural person, the maximum subscription amount is NT$300,000 per STO.
  • Issuance process – issuers must conduct STOs on a single platform, and the platform operator has the obligation to ensure that the issuer meets the relevant qualifications and that the prospectus be well prepared. Where the platform operator itself is an STO issuer, such issuer should not launch an STO without a prior review by TPEx.

Regulations on trading (secondary market):

  • Trading mechanism of security tokens – the platform operator should obtain a securities dealer licence and handle the trading by way of price negotiation. The platform operator should be the counterparty to every transaction and should offer a reasonable reference quotation based on the market conditions. In addition, each security token under an STO programme may be traded only on a single platform.
  • Maximum transaction amount – where the professional investor is a natural person, the maximum amount of holding under an STO programme is NT$300,000. In addition, the maximum daily transaction limit for each STO is 50% of the total issuance amount under such STO programme.

STO platform operator:

  • Qualifications of the platform operator – the platform operator should obtain a securities dealer licence, have minimum paid-in capital of NT$100 million and provide an operation bond in the amount of NT$10 million.
  • Total offering amount capacity – the total offering amount of all exempted STOs on a single platform should not exceed NT$100 million. A platform can accept to process a second STO only one year after the security tokens of the first STO have been traded on the platform.
  • Transfer and record keeping – the platform operator should enter into an agreement with the Taiwan Depository and Clearing Corporation and transmit the trading information such as balance changes and balance statement to the Taiwan Depository and Clearing Corporation for its record on a daily basis. The Taiwan Depository and Clearing Corporation should provide STO balance inquiry service to investors.

Subscription and trading: Subscription and trading of security tokens should be conducted on a real name basis and the transactions must be conducted in New Taiwan Dollars under the same name as that featuring on the bank account.

In addition, the FSC will authorise TPEx to further promulgate the relevant regulations governing STOs, so STOs should also comply with the relevant rules and regulations to be promulgated by TPEx.

Stablecoins

What rules and restrictions govern the issue of, and investment in, stablecoins?

There are no rules and restrictions that explicitly govern the issue of, and investment in, stablecoins.  Also, the authors are not aware of any relevant regulatory policies or guidelines announced by the FSC or other competent authorities. However, depending on the nature, structure and models involved in or relating to the particular stablecoins, it is possible that stablecoins and their issuance may be subject to the laws and regulations governing – among other things, securities (especially if the stablecoins would still appreciate in value) and electronic payments.    

Airdrops

Are cryptoassets distributed by airdrop treated differently than other types of offering mechanisms?

The nature of a cryptoasset will still be the determining factor as to whether it is subject to the laws and regulations governing securities or financial products. Generally speaking, no cryptoasset will be treated differently simply because it is distributed by airdrop.

Advertising and marketing

What laws and regulations govern the advertising and marketing of cryptoassets used for investment and financing?

The advertising and marketing of security tokens should comply with the FSC’s proposed STO regulations (once officially promulgated), as well as the relevant rules and regulations that may be issued by the relevant regulators.

Trading restrictions

Are investors in an ICO/STO/stablecoin subject to any restrictions on their trading after the initial offering?

The trading of cryptoassets with the nature of securities (ie, security tokens) should comply with the FSC’s proposed STO regulations (once officially promulgated), as well as the relevant rules and regulation that may be issued by the relevant regulators.

Crowdfunding

How are crowdfunding and cryptoasset offerings treated differently under the law?

The FSC previously established the following regulatory regime for equity-based crowdfunding, which is exempted from the prior approval or effective registration normally required under the Securities and Exchange Act:

  • The Go Incubation Board for Start-up and Acceleration Firms (GISA) of TPEx – TPEx, one of the two securities exchanges in Taiwan, established GISA in 2014 for the purpose of assisting innovative and creative small-sized non-public companies with capital raising.

A company having innovative or creative ideas with growth potential is qualified to apply for GISA registration with TPEx. After TPEx has approved the application, the company will first start receiving counselling services from TPEx regarding accounting, internal control, marketing and legal affairs. After the counselling period, there will be another TPEx review to examine, among other things, the company’s management teams, the role of the board of directors, accounting and internal control systems, and the reasonableness and feasibility of the plan for capital raising; if TPEx is satisfied with the review, the company may raise capital on GISA. The amount raised by the company through GISA may not exceed NT$30 million, unless otherwise approved. In addition, an investor’s annual maximum amount of investment through GISA should not exceed NT$150,000, except for angel investors defined by TPEx or wealthy individuals with assets exceeding an amount set by TPEx and having professional knowledge regarding financial products or trading experience.

  • Equity-based crowdfunding on the platforms of securities firms – a securities firm may also establish a crowdfunding platform and conduct equity crowdfunding business. Currently, a company with paid-in capital of less than NT$50 million may enter into a contract with a qualified securities firm to raise funds through the crowdfunding platform maintained by such securities firm, provided that the total amount of funds raised by such company through all securities firms’ crowdfunding platforms in a year do not exceed NT$30 million. The amount of investment made by an investor on a securities firm’s platform may not exceed NT$50,000 for each subscription, and may not exceed NT$100,000 in aggregate in a year, except for angel investors as defined in the relevant regulations.
Transfer agents and share registrars

What laws and regulations govern cryptoasset transfer agents and share registrars?

The FSC issued a ruling on 3 July 2019 that officially defines ‘security tokens’ as a type of securities; it also issued a press release on 27 June 2019 to illustrate the proposed regulations on STOs.  The qualifications for the STO platform operators are stipulated in such regulations.  For other cryptoassets, there are no rules and restrictions explicitly governing the transfer agents or share registrars of other cryptoassets.

Anti-money laundering and know-your-customer compliance

What anti-money laundering (AML) and know-your-customer (KYC) requirements and guidelines apply to the offering of cryptoassets?

As far as the authors understand, it has been the FSC's policy since July 2018 that, for the purpose of AML, if a bank's client is a cryptocurrency platform operator and that operator provides a fiat-to-cryptocurrency exchange service, such operator should ensure that its service is provided on a real name basis.  

Further, Taiwan’s Money Laundering Control Act was amended in November 2018 to bring the cryptocurrency trading platform operators and relevant transactions into such regime.

According to the statement that FSC chair Willington Koo made before the Legislative Yuan (Taiwan’s unicameral legislature) on 23 October 2018, the FSC will regulate the AML activities of cryptocurrency trading platforms or relevant transactions under the Money Laundering Control Act after the Executive Yuan officially authorises the FSC as the regulator of AML activities of cryptocurrency trading platforms or exchanges. The Executive Yuan, however, has yet to grant such authorisation to the FSC. In addition, it is unclear at this stage what requirements will be imposed by the FSC on AML activities of cryptocurrency trading platforms or exchanges.

Sanctions and Financial Action Task Force compliance

What laws and regulations apply in the context of cryptoassets to enforce government sanctions, anti-terrorism financing principles, and Financial Action Task Force (FATF) standards?

There are no laws and regulations in this regard, except for AML regulations.

Cryptoasset trading

Fiat currency transactions

What rules and restrictions govern the exchange of fiat currency and cryptoassets?

Security tokensThe transactions (issuance and trading) of security tokens must comply with the security token offering (STO) regulations to be promulgated by the Financial Supervisory Commission (FSC) and the Taipei Exchange (TPEx); the transactions may be conducted in new Taiwan dollars only.

Other cryptoassetsThere are no rules or restrictions governing the exchange of fiat currency and other cryptoassets. However, the FSC issued a press release in 2014 in which it ordered local banks not to accept bitcoins (eg, as a payment means or deposits) or provide any services related to bitcoins (eg, exchange bitcoins for fiat currency). Although this release mentioned bitcoins only, it is generally understood as a general restriction on local banks’ involvement in all cryptoasset-related services.

Exchanges and secondary markets

Where are investors allowed to trade cryptoassets? How are exchanges, alternative trading systems and secondary markets for cryptoassets regulated?

Security tokensThe trading of security tokens must comply with the STO regulations to be promulgated by the FSC and TPEx; the trading of security tokens must be carried out at a platform operated by a FSC-licensed securities dealer.

Other cryptoassetsThere are no rules or restrictions governing the trading mechanism or secondary markets of other cryptoassets. Some anti-money laundering rules apply.

Custody

How are cryptoasset custodians regulated?

Security tokensIt is expected that the platform operator (ie, an FSC-licensed securities dealer) will be required to have relevant internal control mechanisms for custody of security tokens. The platform operator also needs to set up a security policy relating to some key information in order to ensure the security of the issuance and trading. The platform operator also has some record keeping obligations.

Other cryptoassetsThere are no rules or restrictions governing the custodians of other cryptoassets.

Broker-dealers

How are cryptoasset broker-dealers regulated?

Security tokensAs advised above, the trading of security tokens must comply with the STO regulations to be promulgated by the FSC and TPEx, and trading of security tokens must be carried out at a platform operated by an FSC-licensed securities dealer. It is expected that certain personnel of the platform operator will need to meet the relevant requirements regarding qualifications, registration and training to be further set out by the FSC and/or TPEx.

Other cryptoassetsThere are no rules or restrictions governing the broker-dealers of other cryptoassets.

Decentralised exchanges

What is the legal status of decentralised cryptoasset exchanges?

The status of decentralised cryptoasset exchanges is not legally defined. With respect to security tokens or STOs, platform operators must be securities dealers licensed by the FSC. 

Peer-to-peer exchanges

What is the legal status of peer-to-peer (person-to-person) transfers of cryptoassets?

Security tokensAs advised above, the trading of security tokens must comply with the STO regulations to be promulgated by the FSC and TPEx, and trading of security tokens must be carried out on a platform operated by an FSC-licensed securities dealer. With respect to trading of security tokens, the platform operator should be the counterparty to every transaction and should offer a reasonable reference quotation based on the market conditions. Accordingly, the pure peer-to-peer transfers of security tokens are not feasible under the proposed STO regulations.

Other cryptoassetsThere are no rules or restrictions governing the peer-to-peer transfers of other cryptoassets. According to a joint press release issued by the Central Bank of Republic of China (Taiwan) and the FSC in 2013, bitcoin is considered a digital ‘virtual commodity’ instead of a ‘currency’. The rules under the Taiwan Civil Code should generally apply to transfers of bitcoins and any other virtual cryptocurrencies whose nature and characteristics are similar to those of bitcoins.

Trading with anonymous parties

Does the law permit trading cryptoassets with anonymous parties?

Security tokensAs advised above, the trading of security tokens must comply with the STO regulations to be promulgated by the FSC and TPEx. Subscription and trading of security tokens should be conducted on a real name basis and the transactions must be conducted in new Taiwan dollars under the same name as the one featuring on the bank account. Accordingly, trading security tokens with anonymous parties is not permitted under the proposed STO regulations.

Other cryptoassetsThere are no specific rules or restrictions governing the trading of cryptoassets with anonymous parties. One of the requirements for a trade to become enforceable under the Taiwan Civil Code is that the contractual parties have to be identifiable. If anonymous parties in a cryptoassets trade are not identifiable, such trade may not be considered effective or enforceable under Taiwan law. Furthermore, it has been the FSC's policy since July 2018 that if a bank's client is a cryptocurrency platform operator and such operator provides a fiat-to-cryptocurrency exchange service, such operator should ensure that its service is provided on a real name basis. Also, Taiwan’s Anti-money Laundering Act was amended in November 2018 to bring cryptocurrency trading platform operators and transactions into its regime. Therefore, it is very likely that there will be a new requirement under the Anti-money Laundering Act that all cryptocurrency-related transactions should be carried out only on a real name basis.

Foreign exchanges

Are foreign cryptocurrency exchanges subject to your jurisdiction’s laws and regulations governing cryptoasset exchanges?

Security tokensThe offer and sale of ‘securities’ (including security tokens) in Taiwan, whether through public offering or private placement, are regulated activities and shall be governed by the Securities and Exchange Act, its related regulations, as well as relevant rulings issued from time to time by the FSC. A platform operator may not be a foreign entity under the proposed STO regulations.

Other cryptoassetsThere are no rules or restrictions specifically promulgated to govern the platform operators of other cryptoassets. The authors’ view is that, generally speaking, foreign cryptocurrency platform operators should be subject to the same laws and regulations as those applicable to domestic platform operators, in particular from the perspective of consumer protection and anti-money laundering.

Under what circumstances may a citizen of your jurisdiction lawfully exchange cryptoassets on a foreign exchange?

 

Under what circumstances may a citizen of your jurisdiction lawfully exchange cryptoassets on a foreign exchange?

No rules or restrictions have been specifically promulgated to govern Taiwanese citizens' exchange of cryptoassets on a foreign cryptocurrency platform operator.

If the cryptoassets on a foreign cryptocurrency exchange are not issued/created in Taiwan, and the exchange of such cryptoassets happens purely offshore on the foreign exchange, the authors are of the opinion that the exchange of such cryptoassets by a Taiwanese citizen would not fall within the jurisdiction of Taiwan. However, before the authorities expressly opine on this question, the authors cannot rule out the possibility that the cryptoassets exchanged on a foreign exchange may be regarded as security tokens issued and regulated in Taiwan.

As to other cryptoassets, there exist no restrictions on owning, holding or trading such assets on a foreign platform operator. However, it is possible that the trading of cryptoassets (other than security tokens) would be subject to Taiwan's Consumer Protection Act.

Taxes

Do any tax liabilities arise in the exchange of cryptoassets (for both other cryptoassets and fiat currencies)?

There are no laws and regulations specifically providing for taxation of trading in cryptoassets. The authors are of the views outlined below with regard to the application of the general rules of current tax laws.

Securities tokensAs ‘security tokens’ have been defined as securities by the FSC, it is possible that the tax authorities would view the trading of security tokens as securities transactions and, thus, impose on them the same taxation rules as on securities transactions. Additionally, although securities transactions are not subject to capital gain tax in Taiwan, any gain will be included into the calculation of basic income under the Income Basic Tax Act (ie, the law governing Taiwan’s alternative minimum tax). Moreover, the value added tax (VAT) is likely not to be imposed by the tax authorities under the future stipulations.

Other cryptoassetsSubject to future stipulations, so far as the authors understand the trading of other cryptoassets is likely to be exempted from VAT, while the income from such trading is likely to be taxed under the Income Tax Act.

Cryptoassets used for payments

Government-recognised assets

Has the government recognised any cryptoassets as a lawful form of payment or issued its own cryptoassets?

So far, no cryptoassets have been recognised by the government as a lawful form of payment and the government has not issued its own cryptoassets.

Bitcoin

Does Bitcoin have any special status among cryptoassets?

According to some press releases issued by the regulators, bitcoin is considered neither 'legal tender', nor 'currency' nor a generally accepted 'medium of exchange' under the current regulatory regime in Taiwan; instead, bitcoin is deemed a digital 'virtual commodity'. Therefore, bitcoin is not given any special status among cryptoassets.

Banks and other financial institutions

Do any banks or other financial institutions allow cryptocurrency accounts?

No. In a press release issued by the Financial Supervisory Commission (FSC), the FSC has ordered local banks not to accept bitcoins (eg, as payment means or deposits) or provide any services related to bitcoins (eg, exchange bitcoins for fiat currency) and therefore, no banks or financial institutions may allow cryptocurrency accounts.

Cryptocurrency mining

Legal status

What is the legal status of cryptocurrency mining activities?

So far, no Taiwanese laws or regulations have rules to regulate the ‘mining’ of bitcoin or any other types of cryptocurrency. Mining activities are not regulated activities and are therefore generally permitted.

Government views

What views have been expressed by government officials regarding cryptocurrency mining?

The Taiwan government has so far not expressed specific views on cryptocurrency mining.

Cryptocurrency mining licences

Are any licences required to engage in cryptocurrency mining?

As advised above, cryptocurrency mining is not considered a regulated activity in Taiwan and, therefore, no licences are required for engaging in mining activities.

Taxes

How is the acquisition of cryptocurrency by cryptocurrency mining taxed?

There exist no clear rules or regulations on the taxation of the acquisition of cryptocurrency by mining and, so far as we understand, the pure activity of acquiring cryptocurrency by mining would not be subject to tax in Taiwan.

Blockchain and other distributed ledger technologies

Node licensing

Are any licences required to operate a blockchain/DLT node?

So far, no regulatory rules or restrictions have been specifically promulgated or amended to regulate the operation of a blockchain/DLT node, and this would not be considered a regulated activity requiring a licence. However, existing regulated entities (eg, banks) might need to obtain relevant approvals from the relevant regulator (eg, the Financial Supervisory Commission (FSC)) before it may operate a blockchain/DLT node, depending on the actual function of such node and/or the relevant business models involved. For example, according to the Regulations Governing Internal Operating Systems and Procedures for the Outsourcing of Financial Institution Operation, banks could outsource only certain remunerated business operational activities to a third party, and some of them require prior approval from the FSC. In addition, if a bank intends to outsource such operational activities to an offshore service provider, prior approval from the FSC would be generally required. Therefore, if operating a blockchain/DLT node involves regulated activities such as outsourcing, there may be requirements of licences or approvals.

Restrictions on node operations

Is the operation of a blockchain/DLT node subject to any restrictions?

As advised above, so far no regulatory rules or restrictions have been specifically promulgated or amended to regulate the operation of a blockchain/DLT node, and this should not be considered a regulated activity requiring a licence. However, whether operating a node is subject to any restrictions will still depend on the actual function of such node and/or the relevant business models involved.

DAO liabilities

What legal liabilities do the participants in a decentralised autonomous organisation (DAO) have?

There are no clear rules for determining the legal liabilities of a DAO participant in Taiwan. The authors are of the opinion that the legal liabilities of the participants in a DAO should depend on the DAO and its participants.

DAO assets

Who owns the assets of a DAO?

In Taiwan, there are no clear rules for determining the ownership of the assets of a DAO.

From a purely legal perspective, the authors think that the assets of a DAO will be considered owned by the DAO if the DAO is structured as a separate legal entity, while the assets should be considered owned by the participants of a DAO on a pro rata basis if the DAO is neither formed, nor registered nor incorporated as a separate legal entity; this is because the DAO, according to the authors’ understanding of DAO, is formed by the contribution of cryptoassets by its participants.

Open source

Is DLT based on open-source protocols or software treated differently under the law than private DLT?

So far, there are no specific rules or restrictions stipulating DLT or differentiating public and private DLT. The legality and enforceability of DLT application should be determined in accordance with the current laws and regulations on a case-by-case basis.

Smart contracts

Are smart contracts legally enforceable?

Since smart contracts are envisaged to help people form contractual relationships and enforce relevant contractual obligations by means of automatic technologies, their enforceability should be determined, just like the common contracts in written form, based on the rules and legal principles under the Civil Code of Taiwan on a case-by-case basis. Generally speaking, if parties on both sides can convey their ideas to each other through the design of smart contracts and reach an agreement accordingly, the enforceability of such contracts should not be treated differently simply because ‘smart contract’ technologies are used. However, simply using smart contracts might not be enforceable for circumstances where specific formality is mandatorily required, such as transfer of real estate, which would require registration with the regulator and thus may not be completely implemented solely with smart contracts. 

Patents

Can blockchain/DLT technology be patented?

According to the official website of the Taiwan Intellectual Property Office, more than 40 blockchain-related patent applications were published from 2016 to 2018.

According to the Patent Act of Taiwan, the subject of a patent right is ‘invention’ and an invention means the creation of technical ideas, utilising the laws of nature. As a general rule, business methods are regarded as using social or business rules rather than laws of nature and, therefore, may not be the subject of a patent right. As for a software invention, if it coordinates the software and hardware to process the information and there is a technical effect in its operation, it might become patentable.

Update and trends

Recent developments

Are there any emerging trends, notable rulings or hot topics related to cryptoassets or blockchain in your jurisdiction?

It is generally expected that the security token offering (STO) regulations will be ready before the end of 2019, so certain existing cryptocurrency platform operators may wish to apply for a licence for STO platform operator and/or cooperate with existing securities firms to address the licensing issues. 

Law stated date

Correct on

Give the date on which the above content is accurate.

13 November 2019.