Edit | Wu Talks Blockchain
Taiwan Democratic Progressive Party legislator Guo Guowen held a public hearing on “virtual asset supervision” on the morning of September 7. The meeting discussed whether to establish a dedicated unit, the “Financial Technology Bureau,” for regulation, and whether Taiwan should open up leverage derivative trading. Representatives from Binance and Bitfinex attended the meeting. Wu has compiled the following content based on the meeting records:
Government Representative Opening Statement
Huang Xihuo, Head of the Securities Firm Management Group of the Financial Supervisory Commission:
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1. The Virtual Currency Business Association is about to be established. The specific implementation of internal guidance principles needs to be developed through the association. Due to the lengthy process of enacting specific laws, it is currently necessary to rely on the association for self-management;
2. The controversial parts of the current self-management draft include the issuance of white papers, transparency, asset separation, etc.;
3. Some industry players have raised doubts about whether accountants have the ability to conduct audits through certain processes. Currently, there are no appropriate insurance providers for insurance coverage.
Shi Weiren, Deputy Director of the Digital Industry Bureau of the Ministry of Digital Affairs:
Blockchain technology is a transnational technology. The Ministry of Digital Affairs’ main business is to promote its technology in various industries and provide demonstration guidance to industry players. It can be applied to certification, evidence collection, and verification.
You Li Ling, Chief of the Prosecutorial Division of the Ministry of Justice:
Currently, we are actively cooperating with the Criminal Investigation Bureau to combat fraud. Individual currency traders and small-scale operators are particularly serious, and it is recommended that regardless of size, they should all be regulated under the same standards.
Lin Mingjun, Chief of the Economic Division of the Criminal Investigation Bureau:
Currently, we are facing many challenges in combating fraud and money laundering. Regulation should be established by the administrative department and then enforced by the criminal units. Common crimes currently include fraud, money laundering, computer extortion, and physical crimes such as being kidnapped during transactions. It is hoped that regulation can be legalized, and relying solely on industry self-discipline will lead to many problems. It is also hoped that both platforms and over-the-counter (OTC) operators will be subject to regulation.
Industry Representative Speeches
Chen Minghui, Chief Operating Officer of Maicoin:
1. Regarding regulation, it is hoped that it will be governed by specific laws, but it should be managed in a tiered manner. Smaller-scale operators should have different management requirements. Different commodities should also have different regulatory approaches;
2. Regarding the issue of joint prevention of fraud, currently, operators have difficulty in participating in joint prevention efforts and can only privately exchange intelligence with government agencies, making it difficult to directly prevent customers from being defrauded;
3. Asset separation will significantly increase costs and make operations difficult. Support is given to foreign currency traders establishing a presence, but there needs to be consistent regulatory standards.
He Xuanyong, Global Partnership of Binance:
The asset separation system should be audited by accountants and can refer to Japan. The capabilities of employees, transparency, and market fairness have a significant impact, so training for employees should be strengthened. Three suggestions are provided:
1. View virtual assets as completely new and independent financial assets;
2. Establish a team with diverse backgrounds to manage, providing multiple perspectives and a fresh understanding different from traditional ones;
3. Good cross-disciplinary cooperation and communication are required.
Speech by Scholar Representatives
Professor Li Kunzhang:
1. What are the criteria for guiding principles? Should they be based on publicly listed companies or should new internal audit and control standards be established by regulatory authorities in the future?
2. The government should pay attention to the development of trading platforms to avoid Taiwan being marginalized.
3. It is recommended to separate coaching and supervision, with the Financial Supervisory Commission responsible for supervision and the Digital Department as the coaching agency, to avoid conflicts of interest. Currently, the combating of fraud is mainly done by the judiciary and the administrative authorities should promptly establish regulatory rules.
Teacher Zang Zhengyun:
1. Disputes related to virtual assets are not suitable for being segmented and discussed in many stages, but rather should be handled collectively to avoid conflicts among different departments.
2. When consumer disputes arise in the future, who should be responsible for resolving the disputes? It is recommended to establish a Financial Technology Bureau and provide sufficient supervisory resources to relevant units.
3. In terms of future division of labor, which matters can be self-regulated and which matters require broad discussions on external regulation.
Associate Professor Xu Peiling:
1. The current second item of the second clause of the guiding principles is not clear enough and needs further discussion. The exclusion of stablecoins in the third clause needs to be explained. If the division is too detailed, different types of coins will have different regulations, which will increase the difficulty for operators to comply with regulations. It is recommended to establish special legislation to include all types of coins. What is the severity of major events in the tenth clause?
2. Even smaller operators should bear the high cost of complying with laws and regulations, which will increase the pressure on operators.
3. Will there be consideration for opening up derivative products in the future? It is recommended to establish a dedicated regulatory authority for this purpose.
Speech by Association Representatives
Chairperson Cai Yuling of the Taiwan FinTech Association:
Currently, the industry is facing challenges from the entry of traditional finance into the market. At this stage, Taiwan’s focus is mainly on regulation, and the industry development policies are not clear enough. We hope to have more proactive industry policies. The industry is changing rapidly, and special legislation needs to be flexible enough.
Self-regulatory principles should be classified and standardized.
Lawyer Li Yunheng/Deputy Secretary-General of the Taiwan Virtual Asset Anti-Money Laundering Association:
The guiding principles and the definition of anti-money laundering are broad, and applying the same set of regulations to all mechanisms imposes a heavy burden on some operators. After the establishment of industry associations, it is hoped that communication with various departments can be promoted, and regulatory authorities can assist operators in enhancing their professional knowledge and capabilities.
Chairman Lin Hongyu of the Bitcoin and Virtual Currency Development Association:
1. After the establishment of the industry association, it is recommended that the regulatory authorities and the industry association cooperate more closely to make the regulations more specific. The current guiding principles and annexes, regarding the prohibition of advertisements by overseas platforms, suggest that the industry association should be authorized to formulate them, and it is also suggested whether it is possible for compliant domestic operators and overseas platforms to jointly market, in order to ensure responsibility attribution and consumer protection.
2. Insurance (such as commercial insurance, reinsurance), accounting (internal audit and internal control), and law (compliance with laws and regulations) will be important supporting measures for the guiding principles in the future. It is recommended to cooperate with the insurance industry association, accounting/lawyer associations to assist in formulating relevant supervision measures.
3. The association has established formal communication channels with the Salvadoran government (including the Virtual Assets Agency, the central bank, and the presidential office) and is willing to share the communication channels with everyone.
4. Advocate for the normalization of the industry, call for the expansion of the scope of anti-money laundering statements, and reduce the gray areas, underground, and illegal operators, so that compliant operators can formally enter the industry. At the same time, call for the establishment of a “Virtual Asset Agency” to ensure supervisory capabilities.
Speech by Lawyer Representative
Lawyer Cao Weijie/Founder of Xinxi International Business Law Firm:
1. It is suggested to implement hierarchical and classified supervision, for example, requiring individual currency traders to separate their assets, which imposes a heavy burden on operators. It is suggested that operators can discuss cases with law enforcement agencies, and discuss common standards.
2. The cost of coin flow trackers is high. Is it possible to have a role similar to a central depository to coordinate and reduce costs?
3. Support the formulation of special laws and the establishment of a Financial Technology Bureau.
Lawyer Xiong Quandi, Partner of Li Lu Law Firm:
Currently, the classification of virtual currencies is not the same worldwide. Is it suitable to apply traditional regulations to virtual currencies?
It is recommended to establish specialized agencies and enact special laws for management.
Response from the Financial Supervisory Commission
Huang Xihe, Head of the Securities Management Group of the Financial Supervisory Commission:
1. It will take a long time to enact special laws. At this stage, self-disciplinary regulations are still a priority. The details of internal control guidelines will be formulated by the industry association.
2. Consumer disputes should be handled by operators based on contractual relationships. The industry association can also participate in providing assistance.
3. Stablecoins are excluded because Taiwan currently cannot issue them due to issues related to the supply of legal tender. The definition and announcement methods of major incidental events will be formulated by the industry association.
4. It should be carefully considered whether domestic operators should assist foreign operators in publishing advertisements, as it is difficult for consumers to seek compensation from foreign operators, and the responsibility is difficult to determine.
Huang Chaobang, Deputy Head of the Futures Management Group of the Financial Supervisory Commission:
Currently, 27 anti-money laundering declarations have been received, of which 23 need additional information, and 4 are still under review. The examination of anti-money laundering declarations will continue, and new operators will be announced as soon as possible.
Chairman’s Response
Preliminary conclusions of the public hearing:
1. The guiding principles must take into account the capacity of the industry players and should not blindly require risk mitigation.
2. Regulations should not only focus on intensity but also consider breadth.
3. It is recommended that the government develop appropriate industry development policies.
4. It is recommended to establish a dedicated Financial Technology Bureau for management.
5. The goal is to move towards the establishment of dedicated legislation.
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