Taiwan Jurisdiction: A Fintech Legal Overview

Regulatory Maturity, Banking Convergence, and the Stablecoin Era

Introduction: beyond the registration milestone

As Taiwan moves into 2026, the fintech sector has crossed a critical threshold, transitioning from a phase of rapid expansion to one of structural maturity and rigorous oversight. The defining milestone of the previous year was the completion of the virtual asset service provider (VASP) registration deadline on 30 September 2025. With the full implementation of the Money Laundering Control Act (MLCA) amendments regarding the anti-money laundering (AML) registration system and criminal liability for illegal operators by the end of 2024, the market is now populated by a defined group of licensed operators. However, for industry participants, the focus has shifted from the procedural hurdle of registration to the substantive challenge of navigating a maturing – and increasingly scrutinised – ecosystem. The landscape in 2026 is characterised not just by compliance survival, but by the deepening convergence of traditional finance with digital assets and the persistent complexities of decentralised technologies.

The consolidation and maturation of the VASP ecosystem

A significant development in Taiwan’s fintech landscape is the extensive reshaping of the VASP sector. With the rigorous implementation of the registration regime, the market witnessed a sharp contraction: out of the original 26 operators who had completed compliance declarations, ultimately only nine successfully completed the formal registration process to obtain the legal qualification to operate. This result signifies a definitive move towards “quality over quantity”, where the surviving entities are those that have demonstrated the capacity to implement robust internal controls and AML frameworks.

For these remaining VASPs, the primary challenge in 2026 is maintaining compliance in a high-cost regulatory environment while competing with offshore entities that continue to serve Taiwanese users via web interfaces. While the regulatory perimeter is clear for onshore entities, the practical enforcement gap regarding offshore platforms remains a critical competitive distortion. Local operators must navigate a landscape where they are subject to strict supervision, while significant market volume continues to flow through international platforms that may lack comparable local oversight.

The convergence of traditional banking and digital assets

Looking beyond pure crypto-native firms, 2026 is poised to be the year where traditional finance (TradFi) and fintech truly converge in Taiwan. The legislative roadmap for the “Virtual Asset Management Act” (the Special Law), with a draft submitted to the Executive Yuan in mid-2025, is expected to permit traditional banking institutions to issue stablecoins for the first time. This development represents a fundamental shift in market dynamics. Previously, the sector was dominated by offshore issuers (like USDT and USDC) over whom Taiwan has limited supervisory reach. The potential entry of local banks will “onshore” the digital asset market, bringing it under the direct purview of sovereign financial infrastructure and subjecting issuers to stricter prudential supervision regarding reserve custody and disclosure.

Simultaneously, the Central Bank has signalled a preference for regulating these digital payment instruments under frameworks analogous to electronic payments, acknowledging their impact on monetary policy and financial stability. This indicates that fintech in Taiwan is moving from a niche “virtual” economy to becoming a regulated component of the national payment system. However, until the Special Law is enacted, the industry operates in a definition limbo regarding whether stablecoins are virtual assets, electronic payments, or even securities. This uncertainty creates a risk of regulatory arbitrage, compelling forward-looking enterprises to adopt defensive product structuring that anticipates banking-style regulation before it is legally mandated.

Real economy integration and the payment paradox

A notable observation from recent practice indicates that digital assets are increasingly being utilised for real-economy corporate functions, such as cross-border procurement settlements, supply chain finance, and internal fund allocation for overseas subsidiaries. This shift is driven by the high liquidity and relative value stability of stablecoins compared to volatile assets like Bitcoin, offering high transaction efficiency and low costs. With annual transaction volumes reaching levels comparable to major global credit card networks, stablecoins have evolved from speculative tools to mainstream payment media.

However, this integration introduces structural vulnerabilities. The high liquidity and peer-to-peer nature of these assets allow funds to bypass the traditional banking “gatekeepers” that form the backbone of global AML defence. The sheer volume of transactions means that distinguishing legitimate corporate flows from illicit transfers has become exponentially difficult. Market participants must now implement dynamic risk-based approaches (RBAs) that integrate blockchain analytics with traditional transaction monitoring to detect high-risk patterns without stifling the speed of commerce.

The DeFi frontier and technical fragmentation

While centralised regulation tightens, the decentralised finance (DeFi) sector presents a persistent frontier of innovation and challenge. The rise of unhosted (non-custodial) wallets and decentralised exchanges (DEXs) continues to test the limits of current regulatory frameworks. A major hurdle in this domain is the technical fragmentation of the “Travel Rule” (FATF Recommendation 16). Although Taiwan has incorporated this rule into its legal framework, the lack of detailed technical standard guidelines has led to inconsistent practices.

In practice, VASPs face numerous unresolved questions regarding which technical protocol to adopt for transmitting identification information and how to achieve interoperability with offshore VASPs using different solutions, such as the disconnect between the TRUST Protocol and Sygna Bridge. The challenge is further compounded when transactions involve unhosted wallets, where the Travel Rule is technically nearly impossible to execute due to the absence of a counterparty VASP. Overcoming this fragmentation requires a harmonisation strategy, where market leaders adopt multi-protocol solutions and implement enhanced monitoring tools to assess the risk profile of non-custodial wallets, essentially substituting missing counterparty data with on-chain behavioural analysis.

Future outlook: navigating the policy vacuum

As the market awaits the enactment of the Special Law and the FATF’s pivotal stablecoin report due in Q1 2026, Taiwan’s fintech sector exists in a transitional “policy vacuum”. The immediate future will be defined by how well the industry can bridge the gap between existing AML rules and the incoming comprehensive supervision. The risks of this transition are manifold, including the lack of effective supervision over offshore stablecoin reserves and the difficulty of defining regulatory subjects in the DeFi space.

For market participants, success in 2026 requires more than passive compliance. It demands active regulatory engagement and the ability to shape self-regulatory norms through industry associations. The era of “Wild West” growth is definitively over; the new era belongs to those who can demonstrate substance, stability, and strategic foresight in navigating the convergence of strict financial regulation and decentralised technology.