Taiwan’s Financial Supervisory Commission has announced that professional investors can now invest in foreign virtual asset exchange-traded funds (ETFs) using a re-entrustment method. This initiative aims to expand investment options as Bitcoin and Ethereum ETFs have been attracting a lot of money from all over the world. This will also boost the activity of Taiwan’s securities firms in this area. Professional investors include institutional investors, high-net-worth investment institutions, and high-asset clients.
New Rules Bar Individual Investors from Foreign Virtual Asset ETFs in Taiwan
The commission has made this decision following discussions with the Securities Business Association of the Republic of China on the higher risk of investing in foreign virtual asset ETFs. To reduce these risks, the commission advised that only professional investors invest in these investments through re-entrustment because these investments are complex and have high volatility.
According to the new rules by Financial Supervisory Commission, individual investors cannot directly invest in foreign virtual asset ETFs because of their many risks and volatility. As a result, these transactions are limited to qualified investors. They includ institutions and persons with high investable assets and extensive experience in investing.
New Regulations Enhance Investor Awareness for Virtual Asset ETFs
Securities firms are also to enhance their client categorization processes and client-related requirements. They have to put in place an appropriate product structure of virtual asset ETFs that must be approved by the board. Before making the first sale to a specific client, firms need to assess the understanding of virtual assets and investment experience of the customer to match the product with the customer’s abilities and risk appetite.
Further, individual customers, who are not institutional investors, are required to sign a risk warning letter before their first purchase. This letter reminds the investing public that investing in virtual asset ETFs comes with certain level of risk and thus calls for caution.
However, securities firms are required to make relevant product information available to clients before any initial purchase of the security. This step enhances the awareness of the investment. It is intended to assist clients in making decisions concerning their investment in the virtual assets.
Last but not the least, the commission requires the securities firms to provide their employees with training and education on virtual assets and products that they deal in. This training is aimed at improving staff knowledge and capacity to assist clients on these sophisticated structures.
