In line with international trends, the Financial Supervisory Commission opens a pilot program for custody of virtual assets
Taiwan's Financial Supervisory Commission (hereinafter referred to as the Financial Supervisory Commission) announced on November 28 the launch of a themed trial program of "Virtual Asset Custody Business" and will accept applications from financial institutions starting from January 1, 2025. This policy aims to comply with the development trend of international virtual asset business, promote the development of safe and reliable virtual asset custody services by financial institutions, and support the development of domestic financial innovation.
According to the Financial Supervisory Commission, five private banks have expressed their willingness to apply. The trial period is 6 months and the review period is approximately 2 months. If the documents are submitted and the documents are complete in January next year, we can expect to see the first bank officially launch a trial virtual asset custody business as early as the first half of the year. This move not only symbolizes an important milestone in Taiwan's financial technology, but also demonstrates the regulatory authorities' open attitude towards the emerging financial industry.
Detailed explanation of the scope and application requirements for virtual asset custody
The Financial Supervisory Commission emphasizes that the scope of the trial for 'Virtual Asset Custody' services is limited to virtual currencies, such as Bitcoin, Ethereum, and other cryptocurrencies, and does not include asset tokenization (RWA) and non-fungible tokens (NFT). Applicants must provide seven types of detailed information, including custody models, customer service planning, regulatory compliance, organizational management, safety planning, asset isolation, and financial accounting systems.
The application targets are quite broad, including not only traditional banks but also financial institutions that can collaborate with fintech companies. The Financial Supervisory Commission stated that there are no strict eligibility requirements for applicants, focusing mainly on assessing their safety and risk management capabilities. Potential clients primarily include 26 domestic virtual asset service providers (VASP) that have completed anti-money laundering compliance declarations, and those needing custody for foreign VASP operators can also apply.
Financial institutions interested in participating can submit guidance requests to the Financial Supervisory Commission starting today. The official application period for the trial is from January 1, 2025, to April 30, 2025. At that time, the Financial Supervisory Commission will conduct a review of the applications for approximately two months and will announce the list of approved operators after the review.
For more complete information, you can refer to the 'Thematic Business Trial of Virtual Asset Custody Services' document provided by the Financial Supervisory Commission. (Cryptocurrency City) has also summarized the key points in the chart below.
Source of the map: (Cryptocurrency City) Mapping 'Overview of Virtual Asset Custody Services'
A win-win financial innovation model
This policy brings multiple benefits to banks, virtual currency exchanges, and investors. For banks, it is expected not only to increase fee income but also to explore emerging business opportunities in the virtual asset industry through this 'starting point.' International experience shows that banks typically charge fees based on a certain percentage of the assets under custody, opening up new revenue channels for financial institutions.
For virtual currency exchanges, entrusting some virtual coins to a third party for custody can significantly enhance operational security. In the virtual asset custody model, banks can adopt two main methods:
The first is to safeguard customers' private keys, placing a series of alphanumeric key credentials into physical safes or USBs;
The second is to use algorithms to safeguard private keys; however, this method involves complex technology and cybersecurity standards, making traditional banks more cautious.
For investors, the involvement of banks will significantly enhance the trustworthiness of virtual asset platforms, making transactions more secure. Furthermore, the Financial Supervisory Commission emphasizes that the results and experiences from this trial will serve as an important reference for future regulation formulation and policy promotion.
In the face of the rapid development of global cryptocurrency assets, this initiative by Taiwan's financial regulatory agency undoubtedly injects a dose of confidence into the domestic virtual asset ecosystem, and is expected to further strengthen Taiwan's position as a hub for financial technology innovation in Asia.
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'The Financial Supervisory Commission is taking action, launching the 'Virtual Asset Custody Services' next year, with five banks reportedly interested in applying.' This article was first published in 'Cryptocurrency City.'