On June 30, 2026, Taiwan’s Legislative Yuan passed the Virtual Asset Service Act on its third reading. The act requires virtual asset service providers (VASPs) to obtain approval from the Financial Supervisory Commission (FSC) before commencing operations and includes a dedicated chapter on stablecoin issuance and management.

The legislation marks Taiwan’s transition toward a comprehensive framework combining business licensing and AML supervision. This process began in 2018, when virtual asset service platforms became subject to AML obligations under the Money Laundering Control Act. The new law also responds to increasingly stringent standards set by the Financial Action Task Force (FATF) and tighter virtual asset regulations in major jurisdictions, including the US, EU, Hong Kong, Singapore, and South Korea.

FATF has steadily sharpened its focus on virtual assets. In 2019, it revised Recommendation 15 and issued related guidance to bring VASPs within the global AML framework for the first time. At that stage, supervision centered primarily on conventional obligations such as customer due diligence, suspicious transaction reporting, and the Travel Rule. As the stablecoin market expanded and began to challenge traditional payment instruments, however, FATF became increasingly alert to the associated money laundering risks.

On June 26, 2025, FATF published its sixth Targeted Update on Implementation of the FATF Standards on Virtual Assets and VASPs. The report found that implementation remained uneven, despite progress. FATF data showed that only around 33% of jurisdictions had adopted an activity-based regulatory approach; most supervised only VASPs incorporated or physically established within their borders.

On March 3, 2026, FATF went further with its Targeted Report on Stablecoins and Unhosted Wallets. It noted that more than 250 stablecoins were in circulation by mid-2025, with a combined market capitalization exceeding US$300 billion. The blockchain analytics firm Chainalysis estimated that stablecoins accounted for 84% of illicit virtual asset transaction volume in 2025 and were widely used by North Korean hackers, terrorist financiers, and drug traffickers.

Peer-to-peer transactions through unhosted wallets bypass regulated intermediaries. The report identified them as a major vulnerability, and urged jurisdictions to impose clear AML/CFT obligations on issuers, intermediary VASPs, and financial institutions.

The EU recognized virtual asset money-laundering risks relatively early and has developed a multilayered regulatory structure. Its Markets in Crypto-Assets Regulation (MiCA) became fully applicable on December 30, 2024. MiCA harmonized authorization requirements and conduct obligations for crypto-asset service providers, while allowing a transitional period until July 1, 2026.

The revised Transfer of Funds Regulation (TFR) took effect alongside MiCA, extending the Travel Rule from the banking sector to digital asset transfers. It requires the originator and beneficiary information to accompany every transfer, with no minimum threshold. It is among the world’s strictest regimes, providing a model for cross-border virtual asset AML governance.

The US has pursued a unified federal statutory framework. The Guiding and Establishing National Innovation for U.S. Stablecoins Act, or GENIUS Act, was signed into law on July 18, 2025. It establishes statutory requirements covering issuer eligibility, full reserve backing, disclosure, and AML compliance, while authorizing agencies including the Treasury Department and Federal Reserve to develop implementing regulations.

The law’s passage was only the beginning of an extensive rulemaking process. On April 8, 2026, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) jointly issued a proposed rule, treating permitted payment stablecoin issuers as financial institutions under the Bank Secrecy Act. For the first time, it expressly requires them under federal law to establish effective sanctions compliance programs.

This development shows that dedicated stablecoin legislation is not enough. Its policy objectives can be achieved only when detailed implementing regulations give full effect to AML requirements.

Asian jurisdictions have adopted distinct approaches to virtual asset supervision. Hong Kong has pursued the gradual expansion of licensing requirements. After introducing a licensing regime for VASPs in 2023, it issued consultation papers in 2025 and early 2026 on dealing, custody, advisory, and asset management services, progressively bringing these activities within its regulatory perimeter.

Hong Kong’s Stablecoins Ordinance took effect on August 1, 2025, making the issuance of fiat-referenced stablecoins a regulated activity. Issuers must obtain a license from the Hong Kong Monetary Authority and meet requirements including minimum paid-up share capital of HK$25 million. The HKMA has also issued dedicated AML guidance requiring issuers to rigorously verify ownership or control of customer wallets. Operating these businesses without a license is punishable by up to seven years’ imprisonment and a fine of HK$5 million.

Singapore, by contrast, has focused on closing cross-border regulatory gaps. Its digital token service provider regime, effective June 30, 2025, extends licensing requirements to Singapore-based providers that serve only overseas customers. The Monetary Authority of Singapore has indicated that licenses will generally be granted only in exceptional circumstances. This cautious approach seeks to prevent firms from exploiting incorporation-based regulatory gaps for cross-border money laundering, directly addressing FATF’s concerns about offshore VASPs.

South Korea’s experience highlights the policy tensions surrounding stablecoin regulation. The Virtual Asset User Protection Act took effect in July 2024, imposing strict requirements for the segregation of customer deposits from service providers’ proprietary assets, cold wallet storage, and abnormal transaction monitoring.

Korea’s Financial Services Commission subsequently advanced second-phase legislation. The proposed Digital Asset Basic Act defines stablecoins as asset-linked digital assets, and would require issuers to obtain approval and maintain full reserves. Foreign issuers would also have to establish local branches and comply with the same standards, making the proposal one of the strictest territorial regimes.

As of the first half of 2026, however, the legislation remained stalled amid disagreement over whether won-denominated stablecoins should be issued by banks or fintech companies. The dispute illustrates how the balance between industry development and financial stability remains a central challenge for lawmakers worldwide.

Taiwan’s 56-article Virtual Asset Service Act divides VASPs into seven categories: exchange service providers, trading platform operators, transfer service providers, custodians, underwriters, lenders, and other designated businesses. Each activity requires separate regulatory approval. Operating without approval is punishable by up to seven years’ imprisonment and a fine of up to NT$100 million.

Structurally, the act goes a considerable way toward closing long-standing gaps in Taiwan’s virtual asset AML framework, but international developments nevertheless point to three further priorities. First, cross-border regulatory gaps have become a shared global concern. Singapore’s digital token service provider regime and South Korea’s territorial approach proactively bring foreign providers within the domestic regulatory perimeter. Taiwan should use its implementing regulations to clarify the jurisdictional basis for supervising offshore VASPs that serve domestic customers.

Second, the Travel Rule has become a standard feature of international regulation. The EU’s TFR applies it without a minimum transaction threshold. Taiwan should align its thresholds and technical standards with international practice when implementing requirements for transaction information to accompany transfers.

Third, experience in the US, EU, and Korea demonstrates that a dedicated law is just the beginning of regulatory reform. Full implementation depends on a comprehensive body of supporting regulations. Even with clear authorization in the primary legislation, AML risks cannot be adequately contained unless regulators promptly establish detailed rules. The FSC must therefore balance administrative efficiency with international alignment as they formulate the supporting regulations for the act.

This legislation is an important step in aligning Taiwan’s virtual asset regulatory system with international standards. Its structure reflects many of the developments seen in the US GENIUS Act, Hong Kong’s licensing regime, and FATF’s latest guidance. As FATF intensifies its focus on unhosted wallets and offshore VASPs, to fully calibrate the balance between industry development and financial stability, Taiwan should incorporate the latest international practices into its implementing regulations.

The author is Chief Prosecutor at the Taiwan Shilin District Prosecutors Office.