Highlights

The Financial Supervisory Commission (FSC) is set to launch a pilot program for virtual asset custody, engaging three banks that have shown interest. This initiative aims to explore service mechanisms before officially accepting applications from financial institutions.

Sentiment Analysis

• Optimistic: The article conveys a progressive sentiment towards financial innovation and the integration of fintech in traditional banking.
• Supportive: There is a clear acknowledgment of the international trends and an openness to innovate in alignment with global practices.
• Pragmatic: Mention of necessary precautions and preparations highlights a realistic approach to implementing virtual asset services.

Article Text

The Financial Supervisory Commission (FSC) has announced plans to initiate a pilot program focusing on virtual asset custody services. This program stands as a strategic response to the growing international trend of integrating digital assets into traditional financial frameworks. Currently, three banks have expressed significant interest in participating in this venture, marking a progressive step towards modernizing Taiwan's financial sector.

In aligning with global financial innovation efforts, the FSC is soliciting public feedback before opening the formal application process for financial institutions. Such initiatives underscore Taiwan's intention to align with international standards and best practices in managing virtual assets.

Hu Zehua, Director of the Comprehensive Planning Division of the FSC, illuminated the rationale behind this development. With the establishment of the Virtual Currency Commercial Guild and rising demands for virtual asset custody, there is a distinct impetus to pioneer this financial innovation. This pilot will test thematic business operations, facilitating the potential involvement of financial institutions in virtual asset custody.

The commission has published guidelines detailing the principles, business scope, and necessary documentation for application. These include specifics on the types, modes, and processes involved in the custody of virtual assets, customer service planning, regulatory compliance, structural division, management systems, and security protocols. Additionally, financial institutions are urged to gain insights from the experiences of international counterparts and consider collaborating with fintech entities for efficient service delivery.

After gathering external feedback, the FSC plans to refine its business pilot data and subsequently announce receiving applications. Typically, financial institutions may need a preparation window of one to three months post-announcement, likely involving internal discussions and board approvals. Consequently, the initiation of services could span a timeframe of six months to a year, depending on the preparatory successes and feedback from initial trials.

The keen interest from three private banks is noteworthy, stepping away from initial inclinations towards securities firms due to capitalization and security considerations, pointing instead towards banks in the respective groups as better-suited service providers.

The types of virtual assets eligible for custody follow the definitions laid out in the Securities and Futures Bureau's recent guidelines, excluding real-world assets and securities, focusing instead on virtual currencies. The strategic targeting of clientele primarily involves exchanges, initially, before potentially extending services to professional investors once operational security assures robustness. Although at present, there is minimal indication of an imminent inclusion of general investors as primary clients.

Banks offering these services can anticipate generating revenue through custody fees. Unlike traditional safety deposit box charges, international models may align fees with the scale of digital currency holdings, thus proportionately increasing earnings with asset scale.

On tackling money laundering, Hu Zehua stressed the importance of asset isolation, safeguarding against the coexistence of legal and illicit virtual currencies in custody solutions. Effective prevention mechanisms must be in place to ensure compliance and mitigate risks of overarching asset seizure in cases of legal complications.

Last edited at：2024/12/16