Taiwan Banks Eye Stablecoins, Crypto Custody Under New Law

Taiwan’s virtual-asset industry is preparing for tighter oversight under the Virtual Asset Service Act, raising the stakes for private-key custody, transaction monitoring and secure connections with conventional banks. The expansion of stablecoins and tokenized real-world assets, or RWAs, also creates new operational and cybersecurity risks because failures could directly affect payment flows, asset ownership records and customer funds.

The Taiwan Information Security Association has joined CHT Security, Provision Information and other industry participants to establish the Stablecoin and Virtual Asset Security Alliance. The group plans to combine high-grade hardware security modules, blockchain technology and security operations center monitoring to help virtual-asset service providers connect safely with traditional banks. Its work will focus on strengthening regulatory compliance and protecting stablecoins and RWA assets as Taiwan’s new legal framework takes effect.

Taiwan’s Legislative Yuan has passed the Virtual Asset Services Act on its third reading, replacing the virtual asset market’s anti-money-laundering registration regime with a licensing system overseen by the Financial Supervisory Commission. For the first time, the legislation establishes a clear legal framework for stablecoin issuance, requiring issuers to maintain reserves on a one-to-one basis and place them in trust. The law is expected to substantially improve market transparency and investor protection. It also lays a crucial legal foundation for traditional banks to enter on-chain finance and assess the potential of cross-border payments.

The Legislative Yuan passed the law on June 30, 2026, and it could take effect as early as the first quarter of 2027. Stablecoin issuers will need approval from the Financial Supervisory Commission, which must consult the central bank. The development is prompting traditional banks that have piloted custody services, including CTBC Bank, KGI Bank and Union Bank of Taiwan, to accelerate plans for fully reserved stablecoins and cross-border settlement services. Existing operators must apply within 12 months of the law taking effect and obtain a license within 21 months.

Taiwan formally brought virtual assets within its legal regulatory framework after the Legislative Yuan passed the Virtual Asset Service Act on its third reading. The legislation marks an important milestone for the country’s fintech development and signals an increasingly blurred line between cryptocurrencies and traditional finance. To guard against disruption to the domestic currency and foreign-exchange markets and preserve financial stability, regulators must quickly clarify how virtual currencies will be classified and which authorities will oversee them.

Central Bank Governor Yang Chin-long said in July 2026 that the bank planned to regulate U.S. dollar stablecoins along the lines of foreign-exchange controls. He also argued that stablecoins should eventually be issued by banks to manage risk. New Taiwan dollar stablecoins would be easier to regulate because they fall within the domestic currency regime. Although the central bank continues to pursue reserve tokenization, it currently sees no need to use a central bank digital currency for the final settlement of stablecoins.

Stablecoins maintain their value through backing by fiat currencies or low-risk assets and can support round-the-clock cross-border remittances, payment clearing and digital-asset custody. But inadequate rules governing reserve assets, redemptions and anti-money laundering controls could threaten financial stability. Taiwan has therefore placed oversight jointly in the hands of the Financial Supervisory Commission and the central bank, while aligning its framework with regimes including the European Union’s MiCA.

The Executive Yuan approved the draft on April 2, 2026, and the Legislative Yuan passed it on its third reading on June 30. The law requires issuers to obtain permission from the Financial Supervisory Commission and approval from the central bank, maintain reserves equal to 100% of issuance and place them in trust. Nine supporting regulations could take effect together as early as the first quarter of 2027. First Bank is evaluating the introduction of related services, while Hua Nan Bank plans to participate in a payment-clearing pilot. No issuance amount has been disclosed.