Legislators Get On Board Taiwan’s Blockchain Bid 

Picture Taiwan’s blockchain and cryptocurrency community as a sleek locomotive, the Crypto Express, steaming toward an end stop known as “Definitive Regulation.”

Few on board are clear who is driving the train, and none have ever visited their fabled destination, but most are content to reside in their carriages, gambling and playing dice, building the kind of rapport that often forms among travelers thrown together on long journeys.

The carriages soon become a law unto themselves, with the world-weary advising the less experienced as to where best to eat, who to avoid, and how to judge a good bottle of vodka without having to open it.

On a parallel track, the Taiwan Sleeper inches into view – a distinctly less snazzy looking vehicle, a gray-bodied iron-horse staffed by stiff-collared apparatchiks apparently fixated on a single task – counting enormous piles of money.

Seeking to enliven proceedings, those aboard the Crypto Express try to share their experiences with the pallid figures on the adjacent train, only to be rebuffed with the firm assurance that the trains can only intermingle once all the money has all been accounted for.

And despite yesterday’s launch of the Taiwan Parliamentary Coalition for Blockchain (TPCB) and the Taiwan Blockchain Self-Regulatory Organization (TBSRO), the Crypto Express and the Taiwan Sleeper remain on distinctly parallel tracks.

When they do come together, it can be hoped it will be to define the nature of cryptocurrency, draw up criteria for registering and approving initial coin offerings (ICOs) and exchanges, and clarify which arms of government are responsible for regulating what.

This is not going to happen anytime soon. Financial Supervisory Commission (FSC) Director General Tsai Fu-longe (蔡福隆) said in an email to The News Lens that in the short-term, he could not see an opportunity for the Commission’s stance on Bitcoin – still regarded here as a commodity or asset – to change, but that additional efforts would be made to strengthen anti-money laundering (AML) measures around the space.

This is in part because the chief concern of the Executive Yuan – and by extension the FSC, central bank and other bodies concerned with regulating Taiwan’s financial space – is to improve Taiwan’s standing at the next assessment of the Asia-Pacific Group on Money Laundering (APG) in November.

Until that hurdle is cleared, and the government has solidified Know Your Customer (KYC) criteria (a mechanism that prevents anonymous trading) for trading crypto in line with existing AML laws, wider regulation is going to take a backseat and the crypto-minded financial institutions and the companies they serve will go without the clarity and confidence they require to double-down on their commitment to Taiwan.

When asked if the FSC intended to follow Switzerland, where Self-Regulatory Organizations (SRO) are subject to supervision by the financial regulator, Finma, Tsai said it would be “difficult” for the FSC to take part in the SRO because participation is not mandatory.

Switzerland is widely regarded as having one of the most openhanded approaches to regulation of the crypto and blockchain space, having already released guidelines designed to support ICOs by making it clear when they will have to abide by AML and securities laws.

That said, the formation of the TPCB, a cross-party group, represents a sea change in the thinking of the country’s politicians as regards the importance of blockchain and crypto for Taiwan.

That this feat has occurred is in large part thanks to the efforts of self-styled "crypto congressman" Jason Hsu (許毓仁), the man responsible for coordinating yesterday's launch event at the packed Legislative Yuan auditorium and whose office invited the majority of the near 200 attendees.

Rumors of world-leading crypto exchange Binance relocating to Taiwan after running into regulatory roadblocks in Hong Kong and Japan, and an influx of inquiries from other interested parties about setting up shop here, has also helped push politicians into a higher gear.

This, coupled with Hsu's efforts, accounts for the presence yesterday of DPP legislator Hsu Chih-chieh (許智傑), KMT caucus whip Lin Te-Fu (林德福) and fellow legislators Wayne Chiang (蔣萬安) and Fai Hrong-tai (費鴻泰), not to mention Legislative Yuan Secretary-General Lin Chih-chia (林志嘉), representatives of a coalition that also includes members of the New Power Party and the People First Party.

Hsu said: “The SRO and coalition is important for Binance and others [because] they have to know the rules and who to report to when they enter Taiwan. We want to make competition fair and not fall into a situation where bigger fish eat shrimps in the sea, and to ensure our local companies benefit.

“We will be prudent with companies like Binance so that if they come, they are in full compliance. Until that is clear, we won’t have any approvals for a company to operate, especially exchanges.”

Taiwan’s foreign policy community was equally well represented yesterday, comprising emissaries from the American Institute in Taiwan, the Head of Mission at the Representative Office of Switzerland in Taipei, President of the Malaysian Friendship & Trade Center in Taipei, and a bevy of government officials from Australia, Belgium, France and the UK.

Hsu told Block Guardian that the formation of the coalition would allow Taiwan’s parliament and the industry to work with counterparts in South Korea and Japan, as SROs in the region look to form an Asia Pacific alliance and guide best practice.

The coalition was inspired by the formation of a similar groups in South Korea and Japan, and will serve both as a conduit for the industry to communicate with government regulators but also as a vehicle to build consumer trust in the space, he added.

“This year we are paving the foundation for clear regulations for crypto and ICOs, stronger public education about the industry and related risks, and a stronger ecosystem that can facilitate the application of blockchain for industry, for example implementing the technology in hospitals for medical records, and for food safety,” he said.

The SRO principles themselves, incanted in a call and response session led by Block Guardian's own Jeremy Firster, had a distinctly cultish ring, and are vanilla compared with SRO rules governing crypto exchanges in Japan and South Korea.

The symbolism of the industry taking this first step is important nonetheless, and the SRO group, headed by Jaclyn Tsai (蔡玉玲), a former Executive Yuan Minister Without Portfolio under the Ma Ying-jeou (馬英九) administration, is now expected to break off and study specific regulations for ICOs and exchanges.

Whether or when they will be released and reviewed by the regulators remains anyone's guess. It can only be hoped that a meaningful exchange occurs before the Crypto Express and Taiwan Sleeper reach their final stops.

As ever, if you have questions, contributions or suggestions, please send them to blockguardiantw@gmail.com.

Full text of the SRO principles can be found here.

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Editor: Morley J Weston