FintechON, the 2023 "International Supervision Trends in Virtual Assets" financial technology forum organized by the Taiwan Fintech Association (TFTA), concluded successfully on the 23rd. After a series of black swan events occurred in 2022, this forum also invited representatives from industry, government, and academia, and roughly divided the forum into the Americas, the United Arab Emirates, Singapore, Japan, and Taiwan.

The forum was opened by Cai Yuling, chairman of the association. It was mentioned that after the FTX bankruptcy in 2022, many countries are actively planning crypto supervision, but at the same time, the push to become a Crypto Hub has not stopped. The association organizes the 2023 Virtual Assets International Regulatory Trends Forum, hoping to assist the government in establishing a regulatory system that can control risks without hindering industrial innovation and development.

The agenda of the first half includes a conversation with the former chairman of the U.S. Commodity Futures Trading Commission (CFTC), Visa’s views on the future of money, discussions on the virtual asset market and regulatory structure in Japan and the United Arab Emirates, and multilateral talks on virtual asset service providers (VASPs). The forum attracted many professionals from the finance and virtual asset industries to participate, and officials, industry and scholars from various countries expressed suggestions on the supervision of virtual assets. It is hoped that this discussion can promote the development of international supervision of virtual assets and further enhance the competitiveness of the financial technology industry.

Cai Yuling believes that although there has been a lot of criticism after FTX's bankruptcy, she also sees that 20 cities around the world hope to become new "encryption centers", and the efforts to promote the encryption industry are also increasing.

Taiwan's Legislative Yuan last month (January) requested the Executive Yuan to study the characterization of virtual currencies as soon as possible, designate a competent authority and custody mechanism, and submit a project report to the Legislative Yuan within three months. At present, the competent authority and regulatory structure have not yet been clarified, so Cai Yuling also hopes that this forum can provide some opinions to the Executive Yuan.

Cai Yuling pointed out that after the competent authority is confirmed, there will generally be two regulatory directions. One is to be highly regulated and the license acquisition method is more traditional financial. The other is to adopt a looser approach to encourage more new innovations.

Chen Mingtang, director of the Money Laundering Prevention Office of the Political Yuan and Parliamentary Secretary of the Ministry of Justice, believes that there are omissions in domestic regulations on "virtual currencies." The first is that the definition is unclear, and the three concepts of currency, assets, and currency are often used interchangeably. The second is that Taiwan only regulates virtual currency money laundering and the Financial Supervisory Commission is responsible for it, but there is no designated agency for issuance supervision.

In addition, fraud cases through virtual currency are also emerging one after another. How to make the public better understand cryptocurrency is also very important.

So, what problems will we encounter in 2023, when regulatory clarity is about to begin?

ㄧ, securities, commodities, derivatives

In addition to the competent authorities defining responsibility, the biggest controversy currently surrounding virtual currencies is the “category”. Former CFTC Chairman Timothy Massad believes this issue divides virtual assets and creates a gray area. This is also the problem the United States is facing now.

In response to this problem, former CFTC Chairman Timothy Massad gave a solution. The competent authorities should create a set of regulatory frameworks with the most consensus, such as third-party custody of exchanges and segregation of user assets, to protect the vast majority of users.

2. Standard setting, licensing or filing?

After the competent authority is designated, the next issue is attitude. Should we maintain the current licensing system, under unified supervision by the Financial Supervisory Commission, or should we adopt a reporting system to allow small companies to flexibly innovate?

Industry players have different opinions on this point.

Wang Hongshu, CEO of ACE Exchange, suggested that smaller businesses can prepare reports, but they need to meet certain standards, including passing ISO 27001 international information security audits. Asset segregation, reserve certificates, and trust certificates are also required.

Perhaps we can refer to Singapore's approach in this regard.

Singapore's Payment Act (PS Act) has two types of licenses, which are roughly determined by volume. If the floating amount of payment transactions or electronic currency held is lower than the regulations, a Standard Institutional Payment License (SPI) is obtained. The supervision is relatively loose and aims to Encourage new ventures and support small businesses, and obtain a major payment institution license (MPI) if they exceed the standards.

In addition, security tokens are also regulated as components. Generally, security token issuances require a public prospectus, but private or small amounts are exempt. This is somewhat similar to my country’s current exemption from the regulatory sandbox of less than 30 million, but for ordinary businesses, the amount of 30 million (equivalent to 1 million U.S. dollars) is too small. Singapore’s regulations are to raise less than 3.72 million U.S. dollars in 12 months.

3. Existing architecture cannot be fully applied

For regulators, it would be best if cryptocurrencies fit into existing structures. But the problem is that this can stifle new startups. Eleanor Hughes, Binance’s Head of Compliance for Asia Pacific and the Middle East, gave the example of the MVP program regulations in Dubai.

According to the asset adequacy ratio, exchanges need to put a certain proportion of assets into cold wallets. However, the encryption market changes very quickly. If the regulations are followed, it will make traders tied up and unable to provide real-time services to users.

Another example is the “exchange quota” mentioned by MaiCoin Group founder and CEO Liu Shiwei.

Enterprises have a limit of US$50 million on currency exchange every year, and businesses’ external purchases of cryptocurrency are denominated in US dollars, which will generate a large demand for currency exchange. Without reporting standards and platforms for cryptocurrency transactions, the US$50 million limit is very small. Will run out soon. .

Therefore, we need a regulatory framework that is more aligned with the crypto industry.

Legislator Zeng Mingzong: The competent authority will be established after May 16

In response to public concerns, current legislator Zeng Mingzong, who once served as chairman of the Financial Supervisory Commission of the Republic of China, said that the lack of a unified management agency is the reason for poor regulatory efficiency.

Since virtual assets are now defined as general commodities and are under the jurisdiction of the Ministry of Economic Affairs, the supervision of virtual assets is divided. For example, fraud and money laundering are managed by the Ministry of Justice, and securities related are supervised by the Financial Supervisory Commission. There are too many scattered institutions to focus on. overall problem.

Now legislator Zeng has proposed the main resolution and won support from both the government and the opposition. According to this resolution, the Executive Yuan is bound to formulate the competent authority for Taiwan’s virtual currency before May 16, which may be the Financial Supervisory Commission (focusing on supervision) or the Ministry of Digital Development (assisting industry development).

(From left: Chairman of Taiwan Fintech Association Tsai Yu-ling, founder and CEO of MaiCcoin Group Liu Shiwei, CEO of ACE Exchange Wang Hongshu, Member of the Legislative Yuan Zeng Mingzong, founder and CEO of HOYA BIT Cryptocurrency Exchange Peng Yunxian, Rybit Cryptocurrency Exchange founder and CEO Lai Yongchun, BitTo founder and CEO Zheng Guangtai)

At this forum, the Taiwan FinTech Association has gathered the opinions of industry players to complete the "Recommendations for the Development of Taiwan's Virtual Industry" and forwarded it to the Legislative Yuan. After having the competent authority, the next step is to formulate a regulatory structure. What the industry needs is supervision without stifling innovation. As Chairman Tsai Yu-ling said, "Taiwan cannot be absent from the encryption wave."

(The above content is provided by TFTA and compiled by Block Guest)

This article 2023 Financial Technology Trend Forum | Legislator Zeng Mingzong: Taiwan’s virtual currency authority will be drafted before May 16. First appeared on Blockchain.