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Digital Economy:
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Taiwan Demands KYC From Crypto Exchanges, ICO Regulation To Appear In June 2019

08 November 2018 12:47, UTC   |    3769
Taiwan Demands KYC From Crypto Exchanges, ICO Regulation To Appear In June 2019
By Denis Goncharenko

Taiwan is an Asian country, mostly located on the island of the same name. Officially it is called the Republic of China (ROC). The continental China has consistently claimed sovereignty over Taiwan and asserted the ROC is no longer in legitimate existence. This question is still tense, between the aspirations of eventual Chinese unification or Taiwanese independence.

Nevertheless, in the early 1960s, Taiwan has shown rapid economic growth and industrialization, thus creating a stable economy. Taiwan is the 22nd-largest economy in the world by purchasing power parity, and its high-tech industry plays a key role in the global economy. It is sometimes referred to as one of the Asian Tigers. The national economy of Taiwan is the 7th largest in Asia, and is included in the advanced economies group by the IMF. The country benefits from a highly skilled talents and is in the list of the most highly educated countries. Taiwan is a member of the Asian Development Bank (ADB), the World Trade Organization (WTO), and the Asia-Pacific Economic Cooperation (APEC). It signed Economic Cooperation Framework Agreement with China and also signed free trade pact with Singapore and New Zealand.

Here are some interesting facts about Taiwanese economy:

  • Taiwan's economy remains export-oriented, depending on an open world trade and is vulnerable to downturns in the world economy.

  • Taiwan has successfully diversified its trade markets, cutting its share of exports to the USA from 49% in 1984 to 20% in 2002. Today, it is Taiwan's third largest trading partner, taking 11.4% of exports and supplying 10% of imports.

  • 20 of the top information and communication technology (ICT) companies have International Procurement Offices set up in Taiwan.

  • Taiwan is the world's largest supplier of contract computer chip manufacturing (foundry services) and is a leading LCD panel, DRAM computer memory, networking equipment, and consumer electronics designer and manufacturer.

  • The optoelectronics industry of Taiwan was taking a fifth of the global market share in recent years.

Science, R&D and steps towards digitalization

Taiwan has been always known for its passion for new technologies and establishment of science and industrial parks. The Hsinchu Science Park was established in 1980 with a focus on research and development in information technology and biotechnology and later has been called Taiwan's "Silicon Valley". In 2008 this park was represented by 430+ companies employing about 130,000 people with total capital $36.10 billion. The success was followed by the establishment of the Southern Taiwan Science Park in 1996, and Central Taiwan Science Park in 2003.

The thirst for new developments led the government to improve the information and communications infrastructure in the country, with the so-called “e-Taiwan” project. It seeks to raise industry competitiveness, improve government efficiency, and the quality of life.

Key milestones in the development of crypto industry in Taiwan

Since the early years of cryptocurrency emergence, Taiwan took a neutral position and wondered whether to regulate cryptocurrency or support the free market. Liberalization of crypto could have boosted a local financial technology sector, since Taiwan has got a strong high-tech establishment.

The negative stances started appearing in 2015, when the Financial Supervisory Commission (FSC) chairman Tseng MING-JUNG called the cryptos illegal, particularly Bitcoin ATMs.

However, in October 2017, the new chairman of FSC Wellington KOO addressed the parliament with the message that Taiwan should follow Japan, which provides licenses to crypto exchanges, rather than following the model of China and South Korea.

In the end of December 2017, the lawmakers passed the Act on Financial Technology Innovations and Experiments to upgrade the nation’s financial sector by granting startups more options to experiment with innovative financial services in a sandbox after the approval of FSC.

In February 2018, Yang CHIN-LONG, the governor of the country’s central bank, said that the authority would be looking at blockchain technology for its internal systems.

In April 2018, the representatives of the government of Taiwan spoke about the creation of crypto regulation based on anti-money laundering (AML) practices. Chiu TAI-SAN, the Minister of Justice, said that the regulations will take effect in November.

In May 2018, the Taiwan Crypto Blockchain Self-Regulatory Organization (TCBSRO) was launched.

In July 2018, Taipei, the capital of Taiwan, became the site of the Asia Blockchain Summit, one of the most remarkable events in the crypto world. Wellington KOO appeared at the event and claimed that the FSC supports the development of blockchain, while Chen MEI-LING, the official of the National Development Council, expressed hope that Taiwan will become an international hub for blockchain technology.

On October 23, it became known that Taiwan plans to release draft Initial Coin Offering (ICO) regulation by June 2019.

In early November 2018, the Legislative Yuan, Taiwan’s highest legislative body, passed the amendments to the laws pertaining to money laundering and financing terrorism regarding crypto assets. Thus, users of crypto trading resources in Taiwan have to reveal their identities. Banks have been allowed to reject anonymous transfers and report them to the FSC.

A good old ‘Loves Me, Loves Me Not’ game

“There needs to be a whole new set of frameworks and narratives to position crypto and its underlying technology blockchain as the strength that Taiwan can develop. Once that idea is instilled in their minds, I think we will see a quick switch happening,Jason HSU, a Taiwan Legislator and Congressman said in the early March. Later, in his Forbes interview, Mr. HSU expressed his wish to make his country to become the world’s next blockchain island and crypto nation. However, it seems that the crypto enthusiastic congressman and his kind are currently engaged in a “fight with the windmills”. It still is almost impossible to open a bank account for digital currency in Taiwan, and the changes don’t happen so quickly as they are wished to be. The FSC reportedly has asked banks to list crypto trading platforms’ accounts as “high-risk”; during the previous year financial institutions were asked to warn customers about investment risks and not to accept crypto.

Other uses of cryptocurrency are not considered illegal, though. Crypto exchanges based in Taiwan are working, and fintech startups are also popping up, especially after the approval of the Act on Financial Technology Innovations and Experiments. According to Jason HSU, he and his team are working hard on the guidelines for crypto companies which are basically a set of principles explaining the self-regulation; also there’s a project of a “special economic zone” in Taiwan for 200 global blockchain companies. Such initiatives may warm the hearts of  the regulatory representatives, while Wellington KOO regularly claims that Taiwan will not go the direction of China, South Korea and India. The FSC chairman also expresses his concerns that the strict stance won’t do any good to the developments of the industry: “The more we regulate, the more this new economic behavior wanes.” There is still plenty of time until the June 2019, where the certainty of the regulator position to be revealed. By now, the situation in Taiwan crypto industry still stays rather tense than optimistic.
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