Cryptoasset tradingFiat currency transactions
What rules and restrictions govern the exchange of fiat currency and cryptoassets?Security tokens
The transactions (issuance and trading) of security tokens must comply with the security token offerings (STO) regulations promulgated by the Financial Supervisory Commission (FSC) and the Taipei Exchange (TPEx); the transactions may be conducted in New Taiwan dollars only.
No rules or restrictions are 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 tokens
The trading of security tokens must comply with the STO regulations promulgated by the FSC and the TPEx; the trading of security tokens must be carried out at a platform operated by an FSC-licensed securities dealer.
No rules or restrictions are governing the trading mechanism or secondary markets of other cryptoassets. Some anti-money laundering (AML) rules apply.Custody
How are cryptoasset custodians regulated?Security tokens
It 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 to ensure the security of the issuance and trading. The platform operator also has some record-keeping obligations.
No rules or restrictions are governing the custodians of other cryptoassets.Broker-dealers
How are cryptoasset broker-dealers regulated?Security tokens
The trading of security tokens must comply with the STO regulations promulgated by the FSC and the TPEx, and trading of security tokens must be carried out at a platform operated by an FSC-licensed securities dealer. Regarding the regulations on the personnel of the platform operator, the FSC has delegated the supervision authority to the TPEx. The TPEx set forth the relevant requirements regarding qualifications, registration and training in the TPEx Rules Governing the Operation by Securities Firms of the Business of Proprietary Trading of Security Tokens.
No rules or restrictions are 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. Concerning 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 tokens
The trading of security tokens must comply with the STO regulations promulgated by the FSC and the TPEx, and trading of security tokens must be carried out on a platform operated by an FSC-licensed securities dealer. Concerning 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 STO regulations.
No rules or restrictions are 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 tokens
The trading of security tokens must comply with the STO regulations promulgated by the FSC and the 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 are not permitted under the STO regulations.
No specific rules or restrictions are 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 unidentifiable, the trade may not be considered effective or enforceable under Taiwan law. Further, it has been the FSC’s policy since July 2018 that if a bank’s client is a cryptocurrency platform operator and the operator provides a fiat-to-cryptocurrency exchange service, the 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 tokens
The offer and sale of securities (including security tokens) in Taiwan, whether through a 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 STO regulations.
There 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?
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 or created in Taiwan, and the exchange of these cryptoassets happens purely offshore on the foreign exchange, the authors believe that the exchange of these 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, no restrictions on owning, holding or trading these assets exist on a foreign platform operator. However, it is possible that the trading of cryptoassets (except 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 concerning the application of the general rules of current tax laws.
After security tokens have been defined as securities by the FSC, in April 2020, the Ministry of Finance published a ruling confirming that security tokens issued under the STO regulations are subject to 0.1 per cent of security transaction tax under the Securities Transaction Tax Act. 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 transaction fees earned by STO platform operator for services provided within Taiwan is subject to value added tax according to the Value-added and Non-value-added Business Tax Act.
Subject to future stipulations, so far as the authors understand the trading of other cryptoassets is likely to be exempted from value added tax, while the income from this trading is likely to be taxed under the Income Tax Act.
Law stated dateCorrect on
Give the date on which the above content is accurate.
23 October 2020.