Financial Supervisory Commission chairman Wellington Koo today pledged to leave space open for the development of cryptocurrency and distributed ledger technology in Taiwan.

Responding to a request for clarification on Taiwan's stance on crypto from Kuomintang Party (KMT) congressman Jason Hsu, Koo told a joint session of parliament and cabinet that Taiwan would not regulate against the technology. Koo also broadly agreed with Hsu's suggestion that development of distributed ledger and blockchain represents a huge opportunity for innovation and economic growth for Taiwan.

While less than the ringing endorsement called for earlier in these pages, the statement suggests Taiwan will refrain from following in the footsteps of China and South Korea by initiating an outright ban on crypto-related activity.

The statement also paves the way for the successful passing of the “Financial Technology Innovation Experimentation Act” later in the current parliamentary session, according to Hsu.

“Just because China and South Korea are banning, doesn’t mean that Taiwan should follow suit – there is a huge opportunity for growth in the future,” Hsu said yesterday. “We should emulate Japan, where they treat cryptocurrency as a highly regulated, highly monitored industry like securities.”

China recently banned crypto exchanges and initial coin offerings (ICOs), in which companies seek investment in the form of cryptocurrency to pursue crypto-related development, ahead of its critical National People’s Congress in mid-October. Korea prohibited ICOs and is reviewing the status of trading on its exchanges.

But both China and South Korea have allowed initial space for the crypto ecosystem to grow unfettered. Now both countries are assessing their experiences, and regulators are working with engaged and active ecosystems to iron out wrinkles. In Singapore, a fintech "sandbox", or area of experimentation, effectively sponsors banks to get involved. As a result, the Infocomm Development Authority of Singapore in tandem with OCBC Bank, HSBC and Mitsubishi UFJ Financial Group just concluded trials of the first consortium in Southeast Asia to develop a know your customer blockchain prototype. This allows customers to provide their details just once before they are allowed to transact with all the banks on the chain. The benefits to consumers of such an approach are obvious.

Meanwhile, Taiwan has talked the talk on so-called fintech innovation, but failed to walk the walk. The future for fintech looked bright when the FSC in 2016 released a white paper detailing targets for the years to come. Promoting blockchain was on that list, as was the aspiration to create a world-class fintech incubation center, not to mention encouraging the use of tokenization technology.

And yet the authorities have taken an obscure path to realizing these goals. In May, the Executive Yuan proposed the “Financial Technology Innovation Experimentation Act”. This effectively takes the drive to establish a fintech sandbox out of the hands of regulators. Instead, Taiwan’s parliament must now pass a bill, putting a complex and daunting proposition in front of legislators later this parliamentary session.

Taiwan has a nascent yet highly active crypto scene that is getting on with things regardless. MaiCoin, the country's only digital assets exchange platform, boasts about 25,000 active users, or about 0.1% Taiwan's population. AMIS, a Taipei-based blockchain consultancy and sister company of MaiCoin, is attempting to engage financial institutions in a private blockchain consortium proposition. So far, and to their credit, only Taipei Fubon Bank and Taishin International Bank have signed on, while Taiwan’s Industrial Technology Research Institute is an investor. The underlying platform has a myriad potential uses beyond financial services. For example, AMIS partner OwlTing is pioneering blockchain-based supply chain verification in the organic food segment, removing the middleman as the guarantor of “organicness” and replacing it with blockchain-authenticated data. So far the system is limited to pork, and shows information that tracks the birth of the piglet through its vaccinations and feed regime that will eventually be reviewable by the consumer at the point of sale by scanning a QR code.

Gcoin, a permission based distributed blockchain infrastructure for enterprises out of National Taiwan University's blockchain lab, and Bitmark, which leverages blockchain to provide a means for individuals to take ownership of their digital assets, are other Taiwan companies active in blockchain development. These companies and the people they serve would benefit from the security of knowing they are investing in a space that the government supports.

Following Japan, as congressman Hsu suggests, will not be easy. The first crypto exchange sprang up in Japan in 2010. They have been in the space since day one and have gathered what in crypto-time amounts to eons of experience. Second, the yen is a free-floating currency. The Taiwan dollar by contrast is pegged to its U.S. counterpart and managed to keep exports competitive. Stoking cryptocurrency trade and ownership is probably not something the central bank is going to get behind.

But all is not lost. What is needed is a statement of intent that drives the dialogue between stakeholders that could result in regulation that accounts for these realities.

"Crypto is here to stay in some form, whether its fiat money and crypto in a hybrid or crypto only," said Philipp Pieper, co-founder of Swarm Fund, a U.S.-based platform focused on attracting alternative funding for high-risk assets such as distressed real estate through tokenization. "If you don't realize that as a reality then you are shutting yourself down for future compatibility as a country or a company. There is a real systems competition that is happening where smaller more agile countries can outpace other countries in terms of their stance."

The race is on. It's time Taiwan made a start.