Taiwan Tightens Cryptocurrency Regulations: Credit Cards Off the Table

In a move that further underscores Taiwan's cautious stance on cryptocurrencies, the country's primary financial regulator, the Financial Supervisory Commission (FSC), has directed the banking sector to deny virtual asset providers (VASPs) the status of merchants for credit card transactions. This essentially blocks credit card usage for cryptocurrency purchases in Taiwan, a development that has stirred significant discussion in the global financial landscape.

Cryptocurrencies: Consumer Payment or high-risk Speculation?

As conveyed by local media, the FSC circulated this directive to the Banking Association in early July. The regulator expressed its concerns over the speculative nature and high-risk profile of virtual assets, underlining the inherent complexities associated with monitoring their cash flows. The FSC has steadfastly maintained that credit cards should primarily function as consumer payment tools, not as vehicles for investment, wealth management, or speculative transactions of a high-risk nature.

Interestingly, the FSC equates the purchase of cryptocurrencies using credit cards to online gambling and trading in stocks, futures, and options - activities that are already on the prohibited list. This comparison underscores the regulator's perception of the potential risks tied to digital assets, a topic that continues to evoke global debate.

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Three-Month Compliance Period for Banks

In light of the new regulations, Taiwanese banks have been given a three-month window to ensure compliance. Post this period, they are mandated to conduct internal audits and submit compliance reports to the FSC. This development marks yet another chapter in the FSC's historical skepticism towards cryptocurrencies, having previously broadcasted several warnings about the risks associated with virtual assets.

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Taiwan's Tightening Grip on Crypto Regulations

This latest directive is in line with Taiwan's recent efforts to tighten control over cryptocurrency transactions. In July 2021, Taiwan introduced enhanced anti-money laundering regulations for crypto exchanges, adhering to the recommendations of the Financial Action Task Force. Furthermore, towards the end of June, Taiwan's Central Bank Governor hinted that the country's Central Bank Digital Currency (CBDC) pilot program should operate without interest. Taiwan is currently navigating the second phase of this program, where the central bank provides CBDC to chosen banks for distribution to consumers.

The FSC's new directive and Taiwan's evolving stance on digital assets is a reminder of the complex interplay between the digital world and legal frameworks. As decentralized platforms and cryptocurrencies continue to grow, so too does the challenge of effectively regulating these new frontiers of finance.

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