Taiwan will set up clear specifications for cryptocurrencies and ICO
The Financial Supervisory Commission in Taiwan (the FSC) is planning to set up the standards for initial coin offerings (ICO). Since the two most important issues in cryptocurrencies and ICO are money laundering and the nature of ICO, the clarification of these issues can promote more favourable development of cryptocurrencies and ICO in Taiwan.
Money Laundering
Since cryptocurrencies and related financial innovation create opportunities for criminals to conduct money laundering and fraud, the regulation regarding cryptocurrencies and ICO focuses on the prevention of money laundering. According to the report of CipherTrace, there is approximately $2.5 billion worth of bitcoins have been laundered on the top exchanges. The Financial Action Task Force on Money Laundering (the FATF) is planning to build up the first guiding principles for cryptocurrency exchanges and crypto wallet firms across the globe in June 2019.
As for Taiwan, the FSC now adopts five major measures to prevent money laundering, including knowing your customer (KYC), adopting a real-name system, binding deposit account with the same name, monitoring suspicious transaction, and closing accounts. Taiwan also just passed the amendment of the Money Laundering Control Act (the Act) on November 2, 2018, which includes cryptocurrency platforms and related trading business into the scope of the Act.
The definition of ICO
The FSC has maintained an open attitude towards cryptocurrencies and ICO. The FSC published press releases which reminded the public to pay attention to the risks of virtual currencies and announced that whether ICO is subject to the Security Act will be reviewed case by case. Currently, the chairman of the FSC, Wellington Koo, has confirmed that ‘’the FSC is drawing up national standards for initial coin offerings (ICOs) to make virtual tokens as easy to invest in as stocks and just as liquid,’’ the Taipei Times reported on October 23, 2018. The same article reported that Koo said ‘’that tokens exchanged for goods, such as those used in accruing points at convenience stores or mileage points accepted by airlines, would not be covered by the standards.’’ However, if token functions are similar to securities, they will be subject it to the Securities and Exchange Act. The definition of securities in the past case of the Supreme Court requires “presenting a certain value”, “investment” and “liquidity”, but this definition was not directly applicable to ICO case. Therefore, the national standards, which will be completed by June next of year, might promulgate specific cases for companies to follow.
To sum up, based on Koo’s statement, the FSC will regulate cryptocurrencies and ICO from two aspects
‘’the prevention of money laundering in cryptocurrency platforms’’ and ‘’ICO which involve securities.’’
