Last week, the Legislative Yuan passed the first reading of amendments to the Organic Act Governing the Establishment of the Financial Supervisory Commission (金融監督管理委員會組織法). The proposed changes say that a new bureau responsible for supervising virtual assets should be established. This is a significant step, as regulating financial transactions for virtual items has become an important issue.
Transactions in virtual assets are entirely different to those on the traditional financial market, so regulations and mechanisms for the latter are not applicable to the former.
The top priority in regulating a rapidly growing market based on virtual assets is to protect investors, prevent money laundering, and monitor financial products and trading activities that use cryptocurrencies.
If a virtual assets agency is established, the government would be more prepared to deal with the complexity of the virtual financial market.
As is the case with traditional financial markets, the market for virtual assets would be replete with fraud, misinformation and risks. Without an official agency to regulate trade, investors often face unnecessary losses. Relief channels should be arranged to protect investors.
If a bureau in charge of virtual assets is established, management and registration mechanisms would be part of its purview. Investors could use the bureau to identify legitimate service providers, and the risk of being duped would be minimized. This would increase the market’s credibility and interest in virtual investments.
Preventing money laundering is especially important for any kind of financial market. For a virtual market, money laundering is likely to become rampant due to the anonymity and lack of regulatory mechanisms. The new bureau would have to stipulate clear rules and ways to implementing them to prevent money laundering.
As money laundering is a transnational crime, the bureau should communicate and cooperate with other countries to identify financial activities that show signs of illegality.
The bureau should recognize the importance of global collaboration and keep up with the latest international rules. A reporting system should also be established, so investors can report suspicious activities or suspected fraud.
The bureau should also plan relief channels, offering investors a cushion if they incur losses due to illegal financial activities.
Training for service providers of virtual assets would also be a key issue. Service providers must understand the regulations regarding the virtual financial market.
Chen Jie-an is a legal specialist for a technology corporation.
Translated by Emma Liu
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