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Taiwan Financial Supervisory Commission (FSC) has unveiled plans to allow bank-issued stablecoins pegged to the new Taiwan dollar, marking a significant shift in the financial landscape.
These stablecoins, slated to serve as a bridge between fiat currencies and cryptocurrencies, are central to a draft law the FSC plans to propose in June 2025.
Chairman of the FSC, Peng Jinlong, emphasized the importance of stablecoins in connecting traditional and digital financial systems. “Stablecoins can serve as a vital bridge, closing the gap between fiat currencies and cryptocurrencies while providing a more accessible gateway for investors entering the crypto market,” Peng explained during a press briefing.
The draft law will also outline detailed requirements for virtual asset service providers (VASPs), aligning Taiwan’s financial ecosystem with global crypto trends.
Unlike popular global stablecoins such as Tether (USDT) and USD Coin (USDC), Taiwan’s bank-issued stablecoins will be pegged to the new Taiwan dollar instead of the U.S. dollar. This strategic approach aims to reinforce local monetary policy and reduce dependency on foreign reserves.
Zhuang Xiuyuan, Director of the Taiwan central bank, expressed reservations about existing stablecoins. “Stablecoins like Tether and USD Coin claim legitimacy through self-declarations by issuing firms, not government endorsement. Taiwan’s approach ensures regulatory oversight and stability,” Zhuang said.
The Taiwan FSC plans to make it mandatory for locally-issued stablecoins to gain approval before hitting the market. Issuers will need to meet stringent criteria, including firm qualifications, token reserve allocations, and other stipulations outlined in the draft law.
Taiwan’s central bank will play a pivotal role in overseeing bank-issued stablecoins to ensure financial stability. The FSC’s draft law, dubbed the “VASP Registration Regulations,” emphasizes anti-money laundering protocols and mandates annual risk assessment reports for virtual asset service providers.
The regulations, which took effect in January 2025, are designed to safeguard investors while promoting innovation. Key features include:
Stringent compliance with anti-money laundering laws.
Annual reporting on financial risks.
Approval requirements for new crypto services.
“The combination of strong regulatory oversight and a pegged stablecoin will help mitigate risks often associated with crypto markets,” Peng Jinlong noted.
Despite the progressive stance on bank-issued stablecoins, hurdles remain before these digital assets can be integrated into everyday transactions. Zhuang Xiuyuan highlighted challenges such as monetary policy impacts and financial stability concerns.
“Before stablecoins can be used for daily transactions, the central bank must resolve certain economic hurdles,” Zhuang explained. However, he expressed optimism that these issues could be addressed through collaboration between financial regulators and the banking sector.
Taiwan’s stablecoins will initially be limited to specific use cases, such as crypto trading and cross-border remittances, rather than retail payments.
The global stablecoin market has often been criticized for its lack of transparency and regulatory compliance. By introducing bank-issued stablecoins, Taiwan aims to set a new standard for the industry.
“Taiwan’s model could serve as a blueprint for other nations, blending regulatory oversight with the flexibility of blockchain technology,” said Crypto analyst James Carter from Blockchain Insights.
This move also aligns with Taiwan’s broader strategy to position itself as a hub for digital asset innovation. The FSC’s pilot program for crypto custody services, set to begin in early 2025, underscores the nation’s commitment to fostering a secure and dynamic crypto ecosystem.
With the FSC’s proposed law, Taiwan is poised to lead in creating a secure and transparent framework for bank-issued stablecoins. By pegging these stablecoins to the new Taiwan dollar and ensuring central bank oversight, the nation is taking a calculated yet ambitious step into the future of finance.
As Peng Jinlong aptly stated, “Stablecoins represent a new chapter in the financial system, one that bridges the old and the new, providing stability and opportunity in equal measure.”
As the world watches Taiwan’s regulatory developments, one thing is clear: bank-issued stablecoins could redefine the relationship between fiat and digital currencies, setting a precedent for innovation and trust in the financial sector.
Taiwan’s introduction of bank-issued stablecoins reflects its forward-thinking approach to integrating blockchain technology with traditional finance.
By establishing strict regulatory guidelines, the FSC ensures both innovation and investor protection. This bold move not only strengthens Taiwan’s position in the global crypto ecosystem but also provides a potential roadmap for other countries.
Stay tuned as Taiwan continues to shape the future of bank-issued stablecoins, paving the way for a more interconnected financial world. Get more from The Bit Gazette
