During the Legislative Yuan inquiry on December 19, KMT legislator Lai Shih-Pao raised multiple questions to FSC Chairman Peng Jinlong regarding the phenomenon where the U.S. announced interest rate cuts but triggered a stock market crash. The discussion covered global stock market dynamics, the appeal of the cryptocurrency market for funds, and Taiwan's regulatory policies on decentralized finance (DeFi) and virtual assets.
Legislator Lai Shih-Pao questioned the phenomenon of cryptocurrency operators accepting $USDT and providing interest rate products, referring to it as a 'suspected money-raising' issue. Chairman Peng Jinlong responded that discussions on the special law content next year will include financial products similar to debt securities and will also consider regulations for DeFi, sparking discussion.
Interest rate cuts failed to boost the stock market, legislators puzzled
Lai Shih-Pao pointed out that according to general economic logic, interest rate cuts in the U.S. should be positive news for the stock market, but instead, it led to a drop of over a thousand points. He hopes that Peng Jinlong will professionally analyze the main reasons. Peng Jinlong stated that the market's expectations regarding the speed of interest rate cuts fell short, combined with uncertain international political factors, the year-end vacation effect for investors, and the impacts of U.S. inflation and tariff policies, all of which could lead to significant stock market volatility. He further mentioned that the low expectations for future interest rates in the 'dot plot' are also one of the reasons for the market's lukewarm response.
Is capital flowing into cryptocurrencies?
During the inquiry, Lai Shih-Pao mentioned that some viewpoints believe that funds are flowing from the traditional market to the cryptocurrency market, which may be one of the reasons for the decrease in stock market funds. He noted that Bitcoin's recent price surge has attracted attention in the capital market. Peng Jinlong responded that although trading volume in cryptocurrencies is still low compared to traditional financial markets, the growth rate is astonishing, and Taiwan has also observed that the attractiveness of virtual assets is gradually increasing.
DeFi products challenge regulation: Are they suspected of money-raising?
Lai Shih-Pao specifically pointed out that BitTrust Exchange offers short-term fixed interest rates of up to 4.5% to 5.5% based on stablecoins (such as $USDT), claiming to be 'capital-protected and guaranteed profit.' He believes such products are reminiscent of past money-raising incidents and questioned whether the FSC has regulatory responsibility in this matter.
Peng Jinlong responded: 'This is part of what is called DeFi.' Transactions related to DeFi are currently within the regulatory scope of the Financial Supervisory Commission (FSC), but specific regulations are still being developed. He revealed that the FSC will hold public hearings on the virtual asset management special law starting in January 2025, and will submit it for review by the Executive Yuan in June.
The financial products promoted in the cryptocurrency space are unfair to compliant third-party payment operators
Lai Shih-Pao stated: 'We need to establish some rules. For third-party payments, for example, if I put ten thousand dollars on a certain platform, I spend two thousand to buy something, and there is eight thousand left. If they invest the eight thousand and offer me a fixed interest rate of 4%, is that acceptable? You say it's not allowed for third-party payments, but BitTrust can do this, which is very strange.'
Peng Jinlong responded: 'I did not say it is allowed.' He stated that this is something evolving worldwide, and future special laws will be included in discussions.
BitTrust responded: Not derived from DeFi protocol income
BitTrust responded to Chain News that the debts of BitTrust Exchange are based on the existing borrowing relationships between BitTrust and third parties, structured under Article 294 and Article 350 of the Civil Code regarding debt assignment, with users becoming the rights holders of the purchased debt. To protect user rights, BitTrust's debt comes with a 'buyback clause' ensuring that users can ultimately receive the agreed interest and principal. Additionally, the income from BitTrust's debt comes from transaction fees paid by users for their purchases, not from using user funds to invest in DeFi for profit.
Virtual asset special law: Clearly defining market behavior
Regarding the future direction of cryptocurrency regulation, Peng Jinlong stated that the virtual asset special law will cover transaction regulations, institutional management, consumer protection, and other aspects, and is committed to ensuring the rights of investors. He emphasized that legal trading activities must comply with regulations, and the goal of the special law is to allow emerging financial technologies to develop on a legal and compliant basis.
Lai Shih-Pao emphasized at the end that the public has high expectations of the FSC, believing that the FSC should take responsibility for any industry involved in capital transactions. Peng Jinlong responded that not all capital transactions fall under the jurisdiction of the FSC, but they will strengthen cooperation with other departments to ensure stable market operations.
[Disclaimer] The market carries risks, and investments should be made cautiously. This article does not constitute investment advice, and users should consider whether any opinions, views, or conclusions in this article align with their specific situations. Investing based on this is at one's own risk.
This article is reprinted with permission from: (Chain News)
'Lai Shih-Pao criticizes USDT financial products as suspected of money-raising! FSC: Will discuss regulating DeFi, how do operators see it?' This article was first published in 'Crypto City.'