Taiwan Allows Professional Investors to Access Foreign Crypto ETFs

Highlights:

• Taiwan’s FSC now allows professional investors to invest in foreign virtual asset ETFs.
• Securities firms must evaluate investor suitability before facilitating any transactions.
• Clients must sign a risk disclosure statement before their initial investment.

Taiwan’s financial regulator, the Financial Supervisory Commission (FSC), has authorized professional investors to invest in foreign crypto exchange-traded funds (ETFs), including Bitcoin ETF, through local brokers. The agency noted that this latest move is part of the FSC’s efforts to diversify product offerings and strengthen the re-entrustment business of the country’s securities firms. 

FSC stated that it has started consultations with the Securities Business Association of the Republic of China to evaluate the investment risks of foreign crypto ETFs. Due to the complex nature of virtual assets and their high price volatility, the FSC’s new policy restricts professional investors’ access to foreign crypto ETFs, such as institutional investors, high-net-worth entities, and individuals classified as professionals.

Regulatory Requirements for Securities Firms Engaging with Foreign Crypto ETFs

Securities firms in the country must obtain board approval before gaining exposure to Bitcoin ETFs. They must evaluate a client’s knowledge and experience with virtual assets prior to facilitating their initial investment. These firms must also offer regular education and training on virtual assets for their staff to ensure a thorough understanding of the products. Additionally, clients, excluding professional institutional investors, must sign a risk disclosure statement before making their first investment, according to the FSC.

Additionally, securities firms must provide detailed product information about the ETF to non-institutional clients. The Taiwan FSC announced that it will oversee the implementation of these measures and continue to improve regulations to protect investors while boosting the competitiveness of securities firms.

Taiwan's Financial Supervisory Commission announced that professional investors can invest in foreign virtual asset ETFs through a re-entrustment method. Professional investors include professional institutional investors, high-net-worth investment institutions, high-asset…

— Wu Blockchain (@WuBlockchain) September 30, 2024

FSC Strengthens Regulations to Combat Fraud and Enhance Compliance in Taiwan’s Crypto Market

Earlier this year, FSC Chairman Huang Tianzhu raised concerns about the rise of fraudulent crypto activities, indicating that strict administrative penalties would be imposed on crypto exchanges and foreign currency merchants. He emphasized that cryptocurrencies are not linked to the real economy and warned of increasing investment disputes and risks related to unregulated overseas investments.

Following disasters like the FTX collapse and local fraud incidents, Taiwan’s FSC has taken a firm stance on virtual asset service providers (VASPs). In July, it mandated that VASPs register for Anti-Money Laundering (AML) compliance under the Money Laundering Control Act. In Taiwan, crypto transactions are also subject to a 5% Value Added Tax (VAT). Sellers who are residents or companies must register for tax purposes unless their monthly sales are below NT$40,000 (approximately $1,300).

On July 16, Taiwan’s parliament approved revisions to its anti-money laundering (AML) regulations, mandating crypto providers in the country to register for AML compliance. Failure to comply may result in severe penalties, including up to two years in …https://t.co/HTzMzvHTK0

— Cryptonews.com (@cryptonews) July 17, 2024

Rising Demand for Bitcoin ETFs

Demand for spot Bitcoin ETFs remains strong, with over $1 billion in inflows last week in the United States. Other markets, such as Hong Kong and Australia, have also introduced this investment product, offering investors a regulated environment for investing in this asset class.

Despite the ban, Chinese investors are turning to Bitcoin due to the fragility of the country’s economy. At the 2024 Tsinghua Wudaokou Chief Economists Forum in Beijing last week, former Chinese finance minister Lou Jiwei emphasized the need to closely examine developments in the crypto sector. Amid the rising demand for US Bitcoin ETFs, Lou cautioned about the potential negative effects of crypto on global financial stability.