Taiwan's New Virtual Asset Regulatory System: The Amendment to the "Anti-Money Laundering Act" Passed the Third Reading

Virtual Asset Service Providers Face Strict Registration Requirements

The Legislative Yuan of Taiwan recently passed the amendments to the "Anti-Fraud 4 Laws" on the 16th, which includes significant revisions to the Money Laundering Control Act, greatly increasing the criminal liability for money laundering offenses and subjecting virtual asset service providers (i.e., cryptocurrency exchanges) to strict regulation. The amendments explicitly state that businesses or individuals providing virtual asset services or third-party payment services must complete money laundering prevention and service capacity registration or login, with violators facing up to 2 years of imprisonment and a fine of NT$5 million.

The new regulations stipulate that foreign virtual asset service providers must also register their companies and complete anti-money laundering registration in order to legally provide related services within Taiwan. This means that both domestic and overseas virtual currency trading platforms must adhere to the same regulatory standards to ensure consistency in oversight.

Violation of regulations will face severe penalties

The three readings of the provisions specifically regulate the penalty mechanism for violating registration requirements:

• Those who provide related services without completing anti-money laundering measures, service capacity registration or registration shall be sentenced to imprisonment for not more than 2 years, detention, or a fine of not more than 5 million.
• Those who are registered but have been revoked or abolished, and continue to provide services after the service energy registration has been abolished or become invalid also face a maximum prison term of 2 years and a fine of 5 million.

These penalties demonstrate the determination of Taiwan's regulatory authorities to regulate the virtual asset sector, with the aim of establishing a more standardized market environment to protect investors' rights.

NFT Regulated

The spokesperson for the Executive Yuan, Chen Shih-kai, stated that one of the key points of this amendment is to "strengthen the regulation of virtual asset services and strictly prevent money laundering using virtual assets." It is worth noting that the amendment explicitly includes NFTs (non-fungible tokens) used for "financial investment" and "payment purposes" within the scope of virtual assets, which must be subject to relevant regulatory controls.

For NFT creators, trading platforms, and collectors, this means that related NFT trading activities will also be subject to anti-money laundering regulations, and participants need to pay more attention to compliance requirements.

Combating Identity Misuse and Account Abuse

The three readings of the articles also set strict regulations regarding account management:

• Using false information such as "identity theft" or "alias" to apply for opening accounts or accounts with financial institutions, virtual asset services, or third-party payment service providers.
• "Obtain" or "use" another person's account or account number by improper means

The above actions will be punished with a fixed-term imprisonment of more than 6 months and less than 5 years, and may also incur a fine of up to 50 million yuan. This provision aims to effectively combat financial fraud and money laundering activities conducted through false identities or the misuse of accounts.

Clarification of Money Laundering Definition and Increased Penalties

The revised law clearly lists the four activities that constitute money laundering:

1. Concealment of specific criminal proceeds or disguise of their source
2. Obstructing or endangering the state's investigation, discovery, preservation, confiscation, or recovery of specific criminal proceeds.
3. Receiving, holding, or using another person's specific criminal proceeds
4. Use your own specific criminal proceeds to trade with others

The amendment simultaneously increases the penalties for money laundering crimes. For money laundering profits amounting to 100 million, a prison sentence of 3 to 10 years shall be imposed, along with a fine of up to 100 million; for money laundering profits not reaching 100 million, a prison sentence of 6 months to less than 5 years shall be imposed, along with a fine of up to 50 million. Furthermore, even attempted money laundering will be punished, demonstrating the authorities' determination to combat money laundering activities comprehensively.

Taiwan's recent amendment to the law is being promoted against the backdrop of increasingly stringent global regulation of crypto assets, aiming to establish a more comprehensive regulatory framework for virtual assets and promote healthy market development. For virtual asset users, choosing compliant trading platforms and ensuring that trading activities comply with relevant regulations will become an important measure to reduce legal risks.