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SEP 8, 2023

Full Record of Taiwan's Cryptocurrency Regulation Public Hearing: What Do the Government, Exchanges, and Scholars Say?

by 吴说猫弟, WuBlockchain

Editor | WuBlockchain
On the morning of September 7, Guo Guowen, a legislator from Taiwan's Democratic Progressive Party, convened a public hearing on "Virtual Asset Supervision". The meeting discussed whether to set up a specialized unit "Financial Technology Bureau" for regulation and whether Taiwan should open up leveraged derivatives trading. Representatives from Binance and Bitfinex attended the meeting. Based on the meeting records, Wu has compiled the following content:
Opening statement by the government representative:
Huang Xihe, head of the Securities Dealers Management Division of the Financial Supervisory Commission:
1. The Virtual Currency Industry Association is about to be established, and how its internal guiding principles are specifically implemented needs to be deliberated by the association. Although the establishment of a specific law has been delayed, the industry still needs to rely on the association for self-management.
2. Controversial parts of the current self-management draft include issuing white papers, transparency, and asset segregation, etc.
3. Some industry players questioned whether accountants have the capability to conduct audits through certain processes, and currently, there are no suitable insurers to provide coverage.
Shi Weiren, Deputy Head of the Digital Department's Digital Industry Division:
Blockchain technology is an international technology. The main business of the Digital Department is to promote its technology to various industries and launch demonstration guidance for businesses. It can be applied to storage evidence, acquisition of evidence, and verification.
You Liling, Chief of the Prosecution Division of the Ministry of Justice:
Currently working closely with the National Police Agency to combat fraud, with individual coin merchants and small-scale operators being more severe, suggesting that all operators, regardless of size, should be regulated by the same standards.
Lin Mingjun, Chief of Economic Division of the National Police Agency:
Currently facing many challenges of fraud and money laundering, regulations should first be established by administrative departments, followed by enforcement by criminal units. Common crimes include fraud, money laundering, computer ransom, and physical crimes, such as kidnappings during transactions. It is hoped that regulations can be legalized; relying solely on industry self-discipline can lead to many problems. Both platform and over-the-counter (OTC) operators should be included in the regulations.
Industry Representatives' Statements:
Maicoin COO, Chen Minghui:
1. Regarding regulation, she anticipates specific laws for oversight, but there should be tiered management. Smaller-scale operators should be managed differently, and different products should also have different regulatory methods.
2. On the issue of joint fraud prevention, it is currently challenging for operators to collaborate, and they can only exchange information with government units privately, unable to directly prevent customers from being defrauded.
3. Asset segregation will significantly increase costs, making operation difficult. She supports foreign cryptocurrency businesses entering the market, but there should be consistent regulatory standards.
Binance Global Partnership's He Xuanrong:
Asset segregation systems need auditors for checks, taking Japan as an example. Employee capabilities, transparency, and market fairness have a significant impact; there should be enhanced employee training. Three suggestions are provided:
1. Treat virtual assets as entirely new, independent financial assets.
2. Establish a multi-background team for management, offering diverse perspectives and differing from traditional understandings.
3. Good cross-disciplinary collaboration and communication are essential.
Statements from Scholar Representatives:
Professor Li Kunzhang:
1. What are the standards for guiding principles? Should publicly listed companies be used as a standard, or should new internal auditing and control standards be set by the competent authority in the future?
2. The government should recognize the development of trading platforms to avoid Taiwan's marginalization.
3. Guidance and regulation should be separated. He suggests the Financial Supervisory Commission be responsible for oversight, and the Digital Department act as the guiding authority, avoiding the issue of the player also being the referee. Currently, the crackdown on fraud lies with judicial authorities; administrative agencies should quickly define regulatory rules.
Teacher Zang Zhengyun:
1. Disputes over virtual assets shouldn't be split into many segments for discussion but should be jointly addressed in an integrated manner to avoid conflicts between departments.
2. In the future, when consumer disputes arise, who will be responsible for resolving them? He suggests establishing a Financial Technology Bureau and providing relevant units with sufficient oversight resources.
3. Future discussions should include which matters can be self-regulated and which require external regulation.
Associate Professor Xu Peiling:
1. The current guiding principle's second clause's second item's fifth provision is not clear enough and requires further discussion. The third clause's exclusion of stablecoins is questionable. If the distinction is too detailed and different cryptocurrencies have different rules, it will increase the difficulty for operators to comply. She suggests enacting specific laws to include all forms. What constitutes a significant event in the tenth clause?
2. Smaller-scale operators also have to bear the high cost of legal compliance, increasing their pressures.
3. Will derivatives be considered in the future? She also suggests creating a specialized supervisory authority for dedicated oversight.
Association Representatives' Statements:
Chairwoman of Taiwan Fintech Association, Tsai Yuling:
The current industry faces challenges from traditional finance entering the market. At this stage, Taiwan is solely focused on regulation, and the policies for industry development are not clear enough. She hopes for more proactive industry policies. Given the rapid industry changes, dedicated laws should be sufficiently flexible. The principles of self-regulation should be classified and tiered.
Lawyer/Vice Secretary-General of Taiwan Virtual Asset Anti-Money Laundering Association, Li Yunheng:
The guiding principles and definitions of anti-money laundering are broad. The same set of standards applying to all mechanisms is burdensome for some operators. She hopes that after the establishment of an industry association, they can promote communication with various departments. Also, she wishes that the competent authorities assist operators in enhancing internal professional knowledge and abilities.
Chairman of Bitcoin and Virtual Currency Development Association, Lin Wanyu:
1. After the establishment of the industry association, he suggests closer cooperation between the competent authorities and the industry association to specify standards. Regarding current guiding principles, especially those concerning overseas platforms being banned from advertising, he suggests that the authority should empower the industry association to set them. There are suggestions from operators on whether compliant domestic operators can collaborate with overseas platforms for marketing, ensuring responsibility and consumer protection.
2. Insurance (e.g., commercial insurance, reinsurance), accounting (internal audit & control), and law (legal compliance checks) are essential complements to guiding principles. Cooperation with insurance industry associations and accountant/lawyer associations is needed to draft related supervisory measures.
3. Currently, the association has established formal communication channels with officials in El Salvador (including the Virtual Asset Bureau, the central bank, and the presidential office) and is willing to share these channels with everyone.
4. Advocating for industry normalization, he calls for an expansion of the scope of anti-money laundering statements to reduce gray areas and illegal operators, allowing compliant operators to formally enter the industry. He also proposes the establishment of a "Virtual Asset Bureau" to ensure adequate supervision.
Statements from Lawyer Representatives:
Lawyer/Founder of Xinxin International Business Law Firm, Cao Weijie:
1. Regulatory measures should be tiered and classified. For example, requiring individual cryptocurrency operators to segregate assets is too burdensome. It's suggested that operators and judicial units collaboratively discuss cases to determine a common standard.
2. The cost of tracking coin flows is high. Is there a possibility of a role similar to a central depository to coordinate and reduce costs?
3. He supports the enactment of dedicated laws and the establishment of a Financial Technology Bureau.
Partner Lawyer of Lili Law Firm, Xiong Quandi:
Currently, the global definition of cryptocurrencies is not consistent. Is it suitable to apply traditional regulations to virtual currencies? He suggests the establishment of a dedicated agency and the enactment of specific laws for management.
Response from the Financial Supervisory Commission (FSC):
Leader of the Securities Broker Management Team of FSC, Huang Xihe:
1. The establishment of a dedicated law will still take a long time. At this stage, the focus remains on self-regulatory guidelines. The details of internal control standards are to be established by the industry association.
2. Disputes related to consumption are to be handled by the operators based on contractual relationships, and the industry association can also assist.
3. Stablecoins are excluded because Taiwan is currently unable to issue them, as it involves issues related to the supply of fiat currency. The definition and announcement methods of major accidental events are to be decided by the industry association.
4. Domestic operators assisting foreign operators in advertising should be reconsidered carefully. It's challenging for consumers to seek compensation from foreign operators, and responsibility is hard to clarify.
Deputy Leader of the Futures Management Team of FSC, Huang Chaobang:
Currently, 27 anti-money laundering statements have been received. Out of these, 23 need additional documents, and 4 are still under review. The review of anti-money laundering statements will continue, and the announcements regarding new operators that have completed the process will be made promptly.
Chairman's Response:
Preliminary conclusions of the public hearing:
1. The guiding principles must consider the bearing capacity of operators and should not blindly demand risk reduction.
2. Regulations should not only focus on intensity but also breadth.
3. It's recommended that the government draft appropriate policies for industry development.
4. It's suggested to establish a Financial Technology Bureau for dedicated management.
5. The goal is to work towards the establishment of a dedicated law.
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