The financial landscape in Taiwan is undergoing a transformative shift as the Financial Supervisory Commission (FSC) prepares to roll out new regulations governing virtual asset services. Starting December 1, 2024, all cryptocurrency exchange operators must register under the revised Anti-Money Laundering Act, marking a pivotal moment for regulatory clarity and market legitimacy. This move paves the way for financial institutions to enter the digital asset space, with virtual asset custody services set to begin pilot operations in early 2025.
This comprehensive reform not only strengthens compliance but also opens doors for traditional banks to collaborate with fintech innovators—ushering in a new era of secure, regulated crypto services.
New Regulatory Framework for Virtual Asset Service Providers
In July 2024, Taiwan’s legislature passed amendments to the Anti-Money Laundering Act, officially mandating that all Virtual Asset Service Providers (VASPs) must register with the FSC to legally operate. The regulation applies equally to domestic and foreign entities: any overseas platform offering crypto services in Taiwan must establish a local presence and complete anti-money laundering (AML) registration—or face legal consequences.
Failure to comply carries serious penalties: unregistered operators risk up to two years in prison or fines of up to NT$5 million. These strict enforcement measures underscore the government's commitment to curbing illicit financial activities while fostering a trustworthy digital economy.
👉 Discover how global financial institutions are adapting to new crypto regulations.
Transition Period for Existing Platforms
There are currently 26 VASP platforms that have already submitted AML compliance declarations. To ensure a smooth transition, the FSC has introduced a grace period:
- All previously declared platforms must apply for formal registration by March 31, 2025.
- Final registration must be completed by September 30, 2025.
Platforms that continue operations without full registration after this deadline will be subject to criminal charges and financial penalties. This phased approach allows existing businesses time to adjust while maintaining pressure for full compliance.
Banks Enter the Crypto Custody Arena
One of the most significant developments is the upcoming launch of virtual asset custody trials for financial institutions. Starting in January 2025, banks can apply to participate in a six-month pilot program allowing them to offer secure custody solutions for digital assets.
Key details of the pilot program:
- Application window: January to April 2025
- Review timeline: Approximately two months per application
- Pilot duration: Six months
- Early movers: Five private banks have already expressed interest
The initial target clients are expected to be registered VASPs seeking third-party custody to enhance security and investor trust. By leveraging their established reputation and robust infrastructure, banks can play a critical role in bridging traditional finance with the digital asset ecosystem.
Why Bank-Led Custody Matters
Introducing banks into the crypto custody space brings multiple benefits:
Enhanced Security and Trust
Storing large volumes of virtual assets on centralized exchanges poses significant risks—from hacking to insider fraud. With bank custody, a portion of exchange-held assets will be held in secure, regulated environments, drastically reducing exposure to theft and mismanagement.
For investors, knowing that a reputable bank safeguards part of an exchange’s reserves significantly boosts confidence in the platform’s reliability.
New Revenue Streams for Financial Institutions
Custody services generate recurring fee-based income through asset safekeeping charges. As demand for institutional-grade crypto storage grows, banks can tap into this emerging market without directly engaging in speculative trading activities.
Moreover, participation in the pilot allows banks to gain hands-on experience with blockchain technology, smart contracts, and digital identity systems—accelerating their broader fintech innovation strategies.
👉 See how financial institutions are integrating blockchain into core banking systems.
Driving Financial Innovation Through Collaboration
The FSC encourages both financial-tech partnerships and independent bank applications for the custody pilot. This dual-path approach promotes innovation while ensuring oversight. Technology firms bring expertise in blockchain infrastructure, while banks contribute compliance frameworks, risk management protocols, and customer protection mechanisms.
Such collaboration aligns with global trends seen in jurisdictions like Singapore, Switzerland, and Japan, where regulated custody solutions have become foundational to mature digital asset markets.
Frequently Asked Questions (FAQ)
What is virtual asset custody?
Virtual asset custody refers to the secure storage and management of digital assets—such as cryptocurrencies—by a trusted third party, typically using cold storage, multi-signature wallets, and advanced encryption techniques to prevent unauthorized access.
Which banks can offer custody services?
Only financial institutions approved by the FSC after a formal review process can participate in the pilot program. While five private banks have shown interest, final authorization depends on meeting stringent security and compliance standards.
Do all crypto exchanges need to register?
Yes. All domestic and foreign virtual asset service providers operating in Taiwan must complete registration under the Anti-Money Laundering Act. No exceptions are permitted after the September 30, 2025 deadline.
Can individuals store crypto with banks under this program?
Initially, the custody pilot targets institutional clients like VASPs rather than retail investors. However, successful implementation could lead to future retail-facing products such as custodial wallets or crypto-linked financial instruments.
What happens if a VASP fails to register?
Unregistered platforms face severe penalties, including criminal prosecution (up to two years imprisonment), fines up to NT$5 million, and forced shutdowns. The FSC will actively monitor compliance and take enforcement action when necessary.
How does this affect investor protection?
By requiring registration and enabling bank custody, regulators are creating a safer environment for investors. Third-party asset holding increases transparency and reduces counterparty risk—key factors in building long-term market confidence.
Looking Ahead: Building a Regulated Digital Asset Ecosystem
Taiwan’s dual-track strategy—implementing mandatory VASP registration while launching bank-based custody trials—positions it as a forward-thinking player in the global digital finance arena. These measures address two core challenges: regulatory oversight and infrastructure security.
As more institutions adopt compliant practices and explore innovative use cases, the line between traditional finance and decentralized technologies will continue to blur. The success of the 2025 custody pilot could serve as a blueprint for expanding regulated crypto services, including tokenized assets, stablecoins, and institutional trading desks.
👉 Explore the future of regulated digital asset markets and institutional adoption.
With clear rules, strong enforcement, and active industry participation, Taiwan is laying the groundwork for a resilient, transparent, and investor-friendly virtual asset market—one step at a time.