Taiwan Shapes Self-regulating Future for Crypto and Blockchain at BlockCity

Taiwan Shapes Self-regulating Future for Crypto and Blockchain at BlockCity
Credit: Blockcamp
What you need to know

The door remains open for Taiwan to be a global player in cryptocurrency and blockchain but wider public support may be needed if policymakers are to be convinced.

Updated to include details of blockchain and cryptocurrency policy guidelines submitted to Premier Lai.

Taiwan’s cryptocurrency and blockchain ecosystem continues to advance even as the Financial Services Commission (FSC) and the central bank drag their feet on crystalizing the country’s position on the technology.

Over the weekend, Taipei played host to BlockCity, billed as the largest blockchain festival in Taiwan -- the event featured speakers from as far afield as Gibraltar. Day one saw about 500 people attend the event.

Organized by Blockcamp, a corporate blockchain advisory service and accelerator, and BlockTempo, a Chinese-language media resource for the blockchain community in Taiwan, the BlockCity event comprised a startup expo, hackathon as well as presentations and panel discussions.

Among these was a panel on “Opportunities for Taiwan: A Regulatory Perspective,” during which a potential future path for Taiwan’s blockchain and crypto community began to take shape.

Chief among the recommendations of the panel, which featured Kuomintang legislator Jason Hsu (許毓仁), was that the FSC open up to the idea of the community regulating itself under a so-called Self-Regulating Organization (SRO).

Japan is the model for this, where crypto exchanges have banded together in the wake of the the theft of US$500 million worth of tokens from an unlicensed exchange in January to provide regulatory and security recommendations to Japan’s Financial Services Agency.

Last week, the chair of Taiwan central bank, the 64-year-old Yang Chin-long (楊金龍), told Hsu in a question and answer session that as of now the crypto space in Taiwan is essentially unregulated, although initial coin offerings are treated as a “virtual commodity” and investigations are ongoing by the Ministry of Finance on whether and how they should be taxed.

During that session, governor Yang batted back suggestions that Taiwan could follow Japan’s model, suggesting policymakers are waiting for the results of an investigation by the FSC following recommendations put forward by the blockchain community at the end of last year.

Today, governor Yang said that the central bank had tracked the collapse of cryptocurrency prices over the quarter and would recommend that the Ministry of Justice include crypto transactions under anti-money laundering legislation.

In an interview with The News Lens, Hsu said that the reality is that the stance the government eventually takes on crypto and blockchain is a political and not a technological question, and that the FSC is “waiting for the green light” from Premier William Lai (賴清德).

In bid to hasten that go-ahead, Hsu last week presented Lai with a set of guidelines, drawn up in conjunction with members of Taiwan's blockchain and crypto community, comprising a regulatory policy roadmap that the government could follow, and which would give investors the confidence to allocate resources to Taiwan. Lai is said to have welcomed the input and is setting up a team to study the guidelines.

“The guidelines are a mix of Japan and Singapore's model,” Hsu said, explaining that Singapore currently has a playbook on developing the space rather than concrete, and potentially restrictive, legislation. “If Taiwan is to foster a friendly environment we should not classify crypto as a currency or a security at the moment – it’s better to come up with a new asset class,” Hsu said. “Taiwan could be the first to do this. It would give legitimacy around the asset and provide some basic understanding on tax and other regulated measures.”

The guidelines outline the plans for an SRO, suggest defining crypto as a virtual asset in the manner of credit points or air miles, and recommend that a body should be established similar to that in operation in France to register and approve ICO applications and to ensure that basic AML and know-you-customer elements are in place. They also advocate offering ICO investors tax credits in line with those offered to angel investors, and suggest the formation of a bespoke committee focused on crypto and blockchain among members of the central bank, FSC, Ministry of Finance, Ministry of Economy Affairs, and Ministry of Science and Technology.

Speaking on the panel, Hsu raised the idea of a Taiwan-dollar backed digital currency, the New Taiwan Dollar Token, suggesting that such a project could be funded by allocation a fraction of the estimated NT$50 billion (US$1.72 billion) that it is estimated it will cost to redesign and reissue Taiwan’s current set of bank notes.

Last week, Vitalik Buterin, founder of the Ethereum cryptocurrency, hosted an education workshop with central bank and FSC representatives. Buterin was in Taiwan for a three-day workshop on sharding, the mechanism through which Ethereum hopes to overcome its scaling difficulties and achieve a VISA-level network transaction rate.

Buterin being here highlights the advantages and opportunity Taiwan has to develop the crypto space if it gets its approach to regulation, primarily the availability of top class engineering talent at a fraction of the salaries commanded in Silicon Valley.

BlockCity panel member Singer Huang (黃紳嘉), CEO of Inno4G, also emphasized that while Japan is a ways ahead in terms of fostering the cryptocurrency and blockchain, the fact that it is a fairly closed society that is difficult for foreign companies to navigate opens space for Taiwan, as does China’s issues with controlling capital flows and its current ban on ICOs. Ditto the fact that the U.S. has a vested interest in restricting the development of the space out of concern crypto could challenge the U.S. dollar’s hegemony over the financial system.

Benjamin Soh, CEO of Gibraltar Exchange, added that if Taiwan moves quickly enough, it could emulate Gibraltar’s success in becoming a global hub for online gambling despite its geographical limitations by virtue of being first to regulate the space. Gibraltar in January introduced a framework for Distributed Ledger Technology regulations so that companies involved can get licensed and gain access to banking and other services.

Panel member Sean King, CEO of the Singapore-based decentralized exchange GTS and involved in drawing up the guidelines submitted to Premier Lai, said that he had met with representatives of the Taiwan Futures Exchange, who expressed enthusiasm for the idea of changing cryptocurrency futures in Taiwan. “If industry can hedge their exposure to crypto then they are more likely to use it,” he said, adding that while his company is registered in Singapore he would be prepared to relocate to Taiwan if the regulatory landscape is more clearly defined.

Achieving that goal requires a level of boldness that Taiwan’s financial overseers have yet to demonstrate. While Hsu is a whirlwind of advocacy and constructive proposals, the mission to launch Taiwan into the crypto stratosphere as yet does not command widespread legislative support.

More must be done by the blockchain community to communicate to government and the public the tangible, real-world benefits of their projects. It is unlikely that a fleet of crypto and ICO-funded Lamborghinis on the streets of Taipei will do much to inspire the sympathy of the public or the politicians that represent them.

In this light, a suggestion by the marvelously monikered panelist XDite, CEO of crypto exchange OTCBTC, that ICOs should be viewed not as a channel for startups with only a white piece of paper to their name to access funding, but as an avenue for established companies to move to the next level in the manner of Series A or B venture capital financing is a solid idea.

Moreover, the experience of panel member Kathleen Chu, PR and marketing lead for blockhive, a blockchain-based collaborative platform, of the work the Estonian government is undertaking to invite blockchain innovators into discussions that focus on the people the technology will eventually serve is enlightening.

There is also something to be said for BlockCity’s innovative approach to ticketing, which involved launching a so-called Initial Ticket Offering (ITO), under which attendees were able to purchase tickets via smart contracts developed by Taiwan-based Joyso. The company said that about 30 people had taken up the option to pay 0.25 Ethereum for a regular ticket for the two-day event, or 1.25 for a VIP pass.

Blockcamp co-founder Jeremy Firster told The News Lens that the ITO allows people to buy tickets without either the customers or organizers having to use a middle-man like Acupass. “It’s to show that you can use crypto. This is one of many examples for BlockCity – how you can use blockchain in many different sectors and industries,” he said. "Sharing those experiences is key to helping Taiwan to become a hub for blockchain activity, and dare I say, a BlockCity.”

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Editor: Morley J Weston