On October 8, Taiwan’s Financial Supervisory Commission (FSC) announced its plans to launch a pilot program aimed at institutions seeking digital asset custody services, as reported by local media.
This initiative is part of a broader strategy to promote financial innovation, with the FSC intending to roll out comprehensive regulations for the digital asset sector by the end of 2024.
Initiatives for Institutional Crypto Custody
The FSC is encouraging participation from financial institutions in a pilot program designed to enable banks to offer custody services for digital assets, including cryptocurrencies, on behalf of clients.
Hu Zehua, the Director of the FSC’s Comprehensive Planning Department, elaborated on the initiative in a press conference, highlighting that a consultation period of 15 days will be initiated to solicit public feedback.
Following this review, the FSC will finalize the program details and announce the timeline for applications, anticipated to begin in early 2025.
Interest from Local Banks
So far, three private banks have expressed interest in joining the program, aiming to provide custody services for virtual asset exchanges and institutional clients.
While some securities firms have shown interest, reservations regarding their lower capital reserves may hinder their participation, suggesting that banks affiliated with larger financial groups are more likely to succeed.
Emphasis on Security
Security remains a paramount concern for the FSC while regulating virtual asset custody. As stated by Hu, institutions dealing with digital currencies must implement strong safeguards given the significant financial implications.
The FSC plans to enforce rigorous anti-money laundering (AML) measures to mitigate risks associated with illegal funds entering the system, thereby safeguarding assets from potential seizures.
Defining Custody Services
Institutions aiming to participate in the pilot program must specify the types of virtual assets they intend to manage, which may include:
Moreover, institutions will need to outline their target client demographics, which could encompass virtual asset platforms, professional investors, or even retail consumers.
Typically, banks worldwide commence their services by catering to virtual asset exchanges, later expanding to institutional investors as security frameworks are established. Retail investors often gain access to such services only in subsequent phases.
Taiwan’s proactive stance in fostering virtual asset services underscores the government’s dedication to financial innovation while prioritizing the establishment of safety and regulatory frameworks.