By Hung Ou Yang and Jia-Jun Fang
Under the authorization of the Money Laundering Control Act enacted on November 2, 2018, Taiwan Executive Yuan promulgated its Directive numbered as Yuan-Tai-Fa No. 1100167722 on April 7 2021 (the "Directive"), relating to virtual currency platform and business, which shall enter into force on July 1, 2021.
The Directive was promulgated to clearly define the scope of virtual currencies and related platform and business subject to the Money Laundering Control Act:
Definition of Virtual Currency
For the purpose of the Money Laundering Control Act, virtual currencies refer to proprietary values which can be digitally stored, exchanged, or transmitted by applying cryptography, distributed ledger technology, or other similar technologies, for the sake of payment or investment, except digital New Taiwan dollars, foreign currencies, currencies issued in mainland China, Hong Kong or Macau, securities, and other financial assets issued pursuant to law.
Definition of the Virtual Currency Platform and Business
The virtual currency platform and business mean any entity providing others with any one of the following services:
1) performing exchange between one virtual currency and New Taiwan dollars, foreign currencies, and currencies issued in mainland China, Hong Kong or Macau;
2) performing exchange between one virtual currency and another virtual currency;
3) transmitting virtual currencies;
4) maintaining custody or administration of virtual currencies or providing tools thereof;
5) partaking or providing financial services concerning offerings or sales of virtual currencies.
To conduct virtual currency platform and business, financial institutions and non-financial businesses or professions designated by the Money Laundering Control Act (such as jewelry dealers, lawyers, accountants, scriveners, notary public, etc.) shall comply with respective anti-money laundering regulations promulgated by each supervisory central competent authority thereof.
If the virtual currencies offered to investors involve the nature of securities, the Securities and Exchange Act shall apply since the Financial Supervisory Commission announced the Decision numbered as Financial-Supervisory-Securities-Corporate No. 1080321164 on July 3, 2019, in which virtual currencies that have the nature of securities have been recognized as the securities under the Securities and Exchange Act. Henceforth, Taipei Exchange (TPEx) also promulgated "Taipei Exchange Rules Governing the Operation by Securities Firms of the Business of Proprietary Trading of Security Tokens" governing Security Token Offerings (STO), on January 20, 2020. According to this Rules, the platform operator must be a securities firm while the issuer must be a company limited by shares organized under the Company Act, excluding any Taiwan Stock Exchange Corporation (TWSE) listed, TPEx listed, and emerging stock companies. Each issuer is limited to offer security tokens for not more than NT$ 30 million via single one platform. In this regard, strict regulations similar to those of public offerings and private placements of securities are applied to the virtual currency platform operator and the issuer concerning STO.
Definition of Virtual Currencies that Have the Nature of Securities
According to said Decision dated July 3, 2019, virtual currencies that have the nature of securities refer to proprietary values which can be digitally stored, exchanged, or transmitted by applying cryptography, distributed ledger technology, or other similar technologies, and have liquidity and the following characteristics of investment (Howey test):
1) the investment is contributed by the contributor;
2) the investment is contributed to a common enterprise or project;
3) the contributor has an expectation of profits from the investment;
4) the profits are to be derived from the efforts of the issuer or third parties.
In order to encourage innovations in Fintech, however, the issuer may apply for sandbox experiment approval and related exemptions from financial regulations, pursuant to Financial Technology Development and Innovative Experimentation Act.
In short, if the virtual currencies involve the nature of securities, Taiwan government has adopted strict regulations as if they are securities. Legal circles have shown concerns whether this approach would undermine incentives and innovations of Fintech. If the virtual currencies do not involve the nature of securities, the Money Laundering Control Act, Counter-Terrorism Financing Act, and relevant regulations will be applicable after July 1, 2021. Future development in the legal framework of virtual currencies in Taiwan is still worth noting.
AUTHOR: Hung Ou Yang
Managing Partner
Taipei
+886-2-2707-9976
[email protected]
AUTHOR：Jia-Jun Fang
.jpg)
Taipei
+886-2-2707-9976
[email protected]
Copyright Brain Trust International Law Firm
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.
撥打電話