Taiwan’s Financial Watchdog Opens Doors for Banks to Explore Digital Asset Custody Trials

• Taiwanese banks will begin trialing virtual asset custody services.
• Taiwan will introduce “special laws” for cryptocurrencies by June 2025.
• Institutional investors in Taiwan can now invest in foreign crypto ETFs.

Taiwan’s Financial Supervisory Commission (FSC) reportedly plans to open digital asset custody services, and domestic banks have expressed interest in the initiative.

Digital Asset Custody

According to  local media reports , the FSC is opening trials that will allow financial institutions to apply to open a digital assets custody business in Q1 2025.

Three private banks have expressed interest in the initiative and intend to target crypto exchanges and professional investors with said services.

The financial watchdog explains that institutions applying in Taiwan need to specify which digital assets they intend to hold, such as Bitcoin (BTC), Ethereum (ETH), and even “Dogecoin (DOGE) etc.”

They must also describe the custody business’s “service targets,” including professional or retail investors, crypto platforms, etc.

The report notes that securities companies had originally expressed interest; however, their capital was too small, which may pose security risks.

Hu Zehua, Director of the Comprehensive Planning Division of the FSC, emphasized that foreign digital asset custody businesses prioritize security above all else. This is primarily due to their potential to attract massive capital inflows, which makes them attractive targets for illicit activities.

As a result, these businesses must implement proper measures to prevent money laundering. One key requirement is that banks must be able to block digital assets of suspicious origin, thereby preventing the seizure of entire custody wallets.

Taiwan Crypto Regulations

The news follows Taiwan’s recent efforts to regulate the crypto industry. These include revamping its registration and anti-money laundering (AML) guidelines for crypto service providers.

Taiwan’s financial watchdog has threatened to impose strict penalties of up to NT$5 million ($150,000) and two years imprisonment for failure to comply. Though currently in draft form, these regulations are expected to be effective on Jan. 1, 2025.

Furthermore, the FSC also announced that it would permit institutional investors to trade foreign crypto exchange-traded funds (ETFs). The regulator intends to draft a proposal for crypto laws by the end of this year, with a view to formally propose them by June 2025.