The FSC today (3rd) published draft rules for stablecoin issuance licensing and administration and 3 related authorized regulations. The Virtual Asset Services Act was promulgated by the President on 115年7月22日, with the effective date to be set separately by the Executive Yuan. To support implementation of the Act and clarify stablecoin issuance and administration, the FSC drafted the rules with reference to international supervisory trends, Financial Action Task Force reports and domestic practice, along with draft amendments to the anti-money-laundering rules for financial institutions, and draft partial amendments to the implementation rules on internal control and audit systems for anti-money laundering and counter-terrorism financing for the banking industry and other FSC-designated financial institutions.
Two Thresholds for Non-Bank Players
For stablecoin issuance licensing and administration, the FSC is following the digital-only bank model, requiring applicant firms to have a financial holding company or bank as a major shareholder, otherwise they may not apply. Eligible applicants are limited to banks, or companies reinvested in by financial holding companies or banks, or other institutions announced by the FSC as eligible to apply for a license. If a non-bank player such as a technology firm wishes to issue stablecoins, it must establish a joint venture subsidiary with the financial industry and its shareholding must not exceed half. In terms of shareholder structure, a single financial holding company or bank must hold over 25%, and other financial holding companies and banks must together hold over 50%.
For non-bank stablecoin issuers, the minimum paid-in capital is NT$3億元, they shall conduct a public offering and specialize in the issuance and redemption of stablecoins. The types of stablecoins that may be issued are stablecoins pegged one-to-one to the New Taiwan dollar or a single foreign currency. Issuers shall verify the identities of subscribers and redeemers before accepting their transactions, and maintain the total fair value of reserve assets for each tranche of stablecoins at no less than the total outstanding balance of such stablecoins, and regularly engage accountants to conduct audits.
Internal Controls, Information Security, Reporting and Disclosure
Issuers shall establish internal control and audit systems, business continuity policies and procedures, and information and communications security management systems. Where a competent authority lawfully requires restriction of stablecoin transfers or disposal of stablecoins, issuers shall ensure prompt handling, and shall also report financial and business information to the FSC and the Central Bank, and handle external information disclosure content and frequency as required. Regarding the incident in which Binance was hacked for 63億 US dollars, the FSC said it mainly involved virtual currencies held in custody for clients, with hot wallets stolen, and it understands no domestic citizens have suffered losses so far, and the FSC limits the cold-wallet ratio to no less than 85%, making hot-wallet risk relatively less likely, with preventive measures in place going forward.