Taiwan FSC to Trial Virtual Asset Custody Services, Three Private Banks Express Interest

The Financial Supervisory Commission (FSC) in Taiwan has stated that it will begin trials of virtual asset custody services. The trials seek to advance financial services in cryptocurrency.

Taiwan’s Financial Supervisory Commission (FSC) has announced plans to begin trials of virtual asset custody services, paving the way for banks to offer cryptocurrency custody services.

This initiative aligns with the FSC’s broader efforts to oversee the virtual asset sector and promote its growth within a regulated framework.

Here's a closer look at the trial details and participation requirements:

The FSC will invite financial institutions to submit thematic business experiment proposals for virtual asset custody, and further details will be provided in an announcement issued by the Commission.

Institutions can then apply to the FSC for participation in the trial program. The Commission will review the applications and select the participating institutions based on predefined criteria.

As part of the trial, banks will be able to specify the categories of virtual assets they are equipped to handle, such as major cryptocurrencies like Bitcoin, Ethereum, or Dogecoin.

They will also need to indicate the intended clients for their custody services, whether cryptocurrency exchanges, institutional and professional investors, or retail investors.

The Commission highlighted that ensuring the security of custody services will be a paramount concern.

Institutions offering virtual asset custody services will be expected to implement robust security measures to safeguard vast sums of digital currencies, mitigating the risk of theft or unauthorized access.

The FSC will also focus on facilitating financial institutions in preventing the use of virtual assets in any criminal activities through effective AML measures.

Three private banks in Taiwan have already expressed interest in offering virtual asset custody services and highlighted their varying approaches to the market.

While some banks aim to provide a broad range of services to different clients, others prefer to focus on specific segments, such as serving cryptocurrency exchanges.

Some securities firms also showed interest in the trial, but the FSC noted that these firms generally have lower capital levels, making it harder for them to meet the stringent security standards for direct virtual asset handling.

As a result, only banks affiliated with these securities firms within the same corporate groups can apply to participate in the trial.

According to Hu, international banks that engage in virtual asset custody are mainly interested in providing services to crypto exchanges initially and then expanding to institutions.

He added that such services are not easily accessible to retail investors as foreign banks do not launch such services directly targeting retail investors.

The FSC will adopt a similar approach, prioritizing security and gradually broadening the scope of related services.

In other news, the FSC is also working on creating a special legal framework for the virtual asset business, with a draft law expected to be submitted before the end of 2024.

This framework will define the legal structure of the industry in Taiwan, providing clear guidance for businesses and financial institutions undertaking virtual asset activities.

The Financial Supervisory Commission (FSC) in Taiwan has stated that it will begin trials of virtual asset custody services. The trials seek to advance financial services in cryptocurrency, making it possible for banks to manage and store Bitcoin, Ethereum and other cryptocurrencies.

This announcement opens a new page of the collaboration between traditional financial institutions and the cryptocurrency sector.

The FSC has revealed that three private banks have already signed up to take part in the pilot scheme.

The trial is to commence in the first quarter of 2025. The initiative is in line with the FSC’s overall approach to supervising the virtual asset sector, as it sets out rules and best practices for the industry’s growth.

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