The Banking Act, the Financial Holding Company Act and the Central Bank of the Republic of China (Taiwan) Act are the three main pillars of the domestic banking industry's legal framework. The Banking Act sets forth general regulations that govern the banking business, protect depositors, facilitate the development of enterprises and coordinate banks' operations within the national financial policy of Taiwan. The Financial Holding Company Act regulates the establishment and operations of financial holding companies. In addition, a separate Offshore Banking Act governs offshore banking units, and the Credit Cooperatives Act regulates community financial institutions.
The Act Governing Electronic Payment Institutions ("EPI Act") and the Act Governing Issuance of Electronic Stored Value Cards used to be the two pillars governing electronic payment, which have increased in significance with the emergence of fintech solutions from the financial market. From 1 July 2021, the electronic payments and electronically stored value cards have been integrated and collectively governed by the amended EPI Act, with the aim of establishing a unified electronic payment-centered ecosystem. As a result, the Act Governing Issuance of Electronic Stored Value Cards has been repealed. By broadening the licensing scope and laying down detailed requirements for electronic payment institutions, the new EPI Act endeavors to promote the development of the electronic payment market as well as to ensure consumer protection.
The Insurance Act is the main framework law in Taiwan for insurance enterprises. There are a number of regulations, including the Enforcement Rules for the Insurance Act; Regulations Governing Insurance Brokers; Regulations Governing Insurance Agents; Regulations Governing Establishment and Management of Insurance Enterprises; and Regulations Governing Offshore Insurance Branches. In general, insurance activities in Taiwan will trigger different requirements for insurance licenses.
The Securities and Exchange Act is the main framework law in Taiwan for securities and securities firms. The regulations include Regulations Governing the Offering and Issuance of Securities by Securities Issuers; Regulations Governing the Offering and Issuance of Securities by Foreign Issuers; Regulations Governing Securities Firms; Regulations Governing Offshore Structured Products; and Taipei Exchange Rules Governing the Operation by Securities Firms of the Business of Proprietary Trading of Security Tokens.
The government has promulgated other financial laws to regulate various financial activities in Taiwan, including the Trust Enterprise Act; the Financial Institutions Merger Act; the Act Governing Bills Finance Business; Securities Investment Trust and Consulting Act; the Financial Asset Securitization Act; Real Estate Securitization Act; and Financial Technology Development and Innovative Experimentation Act.
While the initial coin offerings or securities token offerings (STO) and transactions involving other categories of crypto-assets are emerging from the Taiwan market, the regulators are just in the early stages of crafting legislation related to the crypto-assets markets, focusing mainly on anti-money laundering and STO regulations. The Taipei Exchange Rules Governing the Operation by Securities Firms of the Business of Proprietary Trading of Security Tokens have been in force since 20 January 2020 to regulate the STO and trading business. However, the regulatory regime governing outside of such activities is still unclear. Among all types of crypto-assets, Taiwan regulators only provide a specific legal framework for security tokens, which are subject to the Securities and Exchange Act and relevant securities token offerings regulations (with a few exemptions). In contrast, if the crypto-asset involved does not qualify as a security token, there is no bright-line indicating whether and how those relevant service providers concerned will be regulated. For instance, Bitcoin is still treated like a commodity not subject to financial regulations unless from the anti-money laundering perspective. Therefore, drawing distinctions between different types of crypto-assets (though not easy) is critical in Taiwan because the regulatory treatment hinges largely on whether or not it is a security, which is determined via FSCs case-specific analysis. Lacking in clear supervision, crypto-asset service providers call for being supervised to ease their business promotion. Otherwise, they have difficulties in conducting "know-your-customer" checks at the instersection with fiat currency. As virtual assets frauds and scandals have garnered wide attention, on 26 September 2023, the FSC announced its Virtual Asset Service Providers (VASP) Managing Guidelines as an attempt to strengthen consumer protection from various aspects,such as transparency, assets custody and segregation, internal control of VASP operators and external expert assistance. In addition, the Virtual Asset Management Bill was introduced in the Legislative Yuan and passed the first reading in October 2023. Meanwhile, the FSC is currently conducting a feasibility study to propose its own bill on virtual assets and expects to complete the study by September 2024, showing the possibility of regulating virtual assets through formal legislation in the near future.