The global cryptocurrency landscape is undergoing a transformative shift, driven by evolving regulatory attitudes and technological innovation. In the United States, President Trump’s post-election appointment of David Sacks—former COO of PayPal—as the "White House A.I. & Crypto Czar" signals a strategic push to shape national policy on artificial intelligence and digital assets. This role aims to establish a comprehensive legal framework that supports the growth of the crypto industry while reinforcing America’s leadership in this space. One of Trump’s notable proposals includes positioning Bitcoin as a strategic national reserve asset, reflecting a growing institutional recognition of digital currencies. Market confidence has surged accordingly, with Bitcoin climbing from $60,000 pre-election to surpassing $100,000 by December 2024.
👉 Discover how global policy shifts are reshaping the future of digital finance.
Taiwan’s “Cautiously Friendly” Regulatory Approach
Turning to Asia, Taiwan’s Financial Supervisory Commission (FSC) has adopted a balanced stance—what it describes as “cautiously friendly”—toward virtual asset regulation. In June 2024, the FSC collaborated with the Central Depository & Clearing Corporation and six financial institutions to form a Real-World Asset (RWA) tokenization working group. RWA tokenization refers to the process of converting tangible assets—such as real estate, gold, artwork, or securities—into blockchain-based digital tokens. These tokens enable automated, transparent, and secure trading across borders through smart contracts.
As cryptocurrencies serve both as technical infrastructure and value-transfer mechanisms in these transactions, regulatory oversight becomes essential to ensure market integrity and investor protection. In January 2025, FSC Chairperson Peng Jin-long emphasized that Taiwan’s upcoming Virtual Asset Act draft would be submitted to the Executive Yuan for review by June 2025. This legislation marks a pivotal step toward creating a clear, legally sound environment for crypto innovation.
Expanding Applications in Financial Services
Cryptocurrencies are increasingly integrated into financial services due to their decentralized architecture, transparency, and borderless nature. Their applications extend well beyond speculative trading:
- Cross-border payments: Traditional systems like SWIFT often involve delays, high fees, and exposure to exchange rate fluctuations. Cryptocurrency-enabled transfers offer near-instant settlement at lower costs, making them particularly valuable for remittances.
- Decentralized Finance (DeFi): Built on blockchain technology, DeFi platforms provide financial services such as lending, savings, trading, and insurance without intermediaries. This democratizes access to finance, especially for unbanked populations, while enabling transparent transaction tracking to mitigate systemic risks.
- Asset tokenization: By digitizing real-world assets, RWA expands investment opportunities and enhances portfolio diversification. Fractional ownership lowers entry barriers, allowing more investors to participate in high-value markets like commercial real estate or fine art.
👉 Explore how blockchain is redefining traditional financial models.
Challenges Facing Financial Institutions
Despite these opportunities, integrating crypto into mainstream finance presents significant challenges:
1. Regulatory Uncertainty
While the FSC has brought 25 Virtual Asset Service Providers (VASPs) under its Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines, full regulatory clarity awaits the passage of the Virtual Asset Act. Until then, cross-border crypto payments remain constrained. Additionally, banks must navigate complex compliance requirements when partnering with VASPs.
2. Technological Integration
Legacy financial systems were not designed for blockchain interoperability. Integrating decentralized technologies requires substantial investment in infrastructure upgrades, staff training, and cybersecurity enhancements.
3. Security Risks in DeFi
Decentralized platforms eliminate central control, which increases resilience but also creates vulnerabilities. Smart contract bugs or design flaws can lead to exploits—often targeting large liquidity pools. High-profile hacks have resulted in millions lost, underscoring the need for rigorous security audits.
Moreover, users bear personal responsibility for securing private keys. Without proper education, they become easy targets for phishing scams and social engineering attacks.
Strategic Recommendations for Sustainable Growth
To foster innovation while safeguarding financial stability, Taiwan should consider the following regulatory and operational strategies:
Establish Dedicated Innovation Units
The FSC has already taken a proactive step by launching the Financial Market Development and Innovation Division. To accelerate experimentation, it should promote a “lightweight sandbox” model—streamlining approval processes and reducing time and cost burdens associated with traditional regulatory sandboxes. This would encourage more financial institutions to propose and test novel crypto-based services.
Regulate Stablecoins for Cross-Border Payments
Given the volatility of most cryptocurrencies, their use as reliable payment instruments remains limited. Drawing inspiration from Singapore’s Monetary Authority (MAS), Taiwan could introduce a regulatory framework for stablecoins pegged 1:1 to the New Taiwan Dollar. Such a mechanism would reduce exchange risk and enhance trust in digital payment systems. Initially, these could be tested within controlled sandbox environments before wider rollout.
Foster Local DeFi Ecosystems
Rather than building DeFi from scratch, traditional financial institutions could invest in compliant DeFi protocols—acting as anchor entities that bring credibility and capital. This “mother hen leading chicks” model supports ecosystem development while maintaining regulatory alignment. Concurrently, mandatory smart contract audits and standardized vulnerability response protocols should be enforced.
Strengthen Investor Protections in RWA Tokenization
As physical assets go on-chain, robust disclosure requirements must accompany them. Investors should receive clear information about valuation methodologies, liquidity risks, custody arrangements, and potential conflicts of interest. Collaboration with international bodies like the International Organization of Securities Commissions (IOSCO) can help harmonize cross-border RWA standards.
Furthermore, legal frameworks must address unresolved issues around property rights and tax treatment of tokenized assets—a necessary step for long-term adoption.
👉 See how secure, regulated platforms are driving responsible crypto adoption.
Frequently Asked Questions (FAQ)
Q: What does “cautiously friendly” mean in crypto regulation?
A: It means regulators support innovation and industry growth while implementing safeguards to prevent fraud, money laundering, and systemic risk. The goal is balance—not restriction nor unchecked expansion.
Q: How can stablecoins reduce payment risks?
A: Stablecoins tied to fiat currencies like the NTD minimize price volatility, making them suitable for everyday transactions and remittances where value preservation is critical.
Q: Why is RWA tokenization important?
A: It unlocks liquidity in traditionally illiquid assets (e.g., real estate), enables fractional ownership, broadens investment access, and improves market efficiency through automation.
Q: Are DeFi platforms safe for average users?
A: While promising, DeFi carries risks due to smart contract vulnerabilities and user error (like losing private keys). Enhanced security practices and better user education are essential.
Q: When will Taiwan’s Virtual Asset Act take effect?
A: The draft is expected to be submitted to the Executive Yuan in June 2025. Final enactment will depend on legislative review timelines.
Q: Can traditional banks integrate blockchain without full digital transformation?
A: Partial integration is possible via APIs and partnerships with fintech firms. However, long-term competitiveness will require deeper technological modernization.
Conclusion
As global powers like the U.S. embrace crypto-friendly policies, Taiwan stands at a strategic inflection point. With its “cautiously friendly” approach, strong institutional foundation, and forward-looking initiatives like RWA tokenization and regulatory sandboxes, the island nation has the potential to become a regional leader in responsible digital finance innovation. By aligning policy with technological progress and prioritizing security and transparency, Taiwan can unlock new frontiers in financial services—one blockchain transaction at a time.