Author: Max, CryptoCity
Taiwan’s FSC Integrates VASPs into Enhanced Anti-Fraud Network: Banks and Crypto Platforms to Share Suspicious Transaction Data
In a significant regulatory move, Taiwan’s Financial Supervisory Commission (FSC) yesterday announced comprehensive amendments to the “Regulations Governing Financial Institutions and Virtual Asset Service Providers or Personnel for Preventing Fraudulent Criminal Harm.” This update introduces 3 new articles and revises 52 existing ones, fundamentally strengthening the collaborative anti-fraud framework between traditional banks, electronic payment providers, and Virtual Asset Service Providers (VASPs).
A cornerstone of these revisions is the formal establishment of a cross-industry consultation mechanism. Under this new system, financial institutions and VASPs are legally empowered to share critical information regarding specific accounts, transaction records, and abnormal behaviors. Both parties are now obligated to provide necessary data to facilitate the identification of potential fraud, money laundering, or illicit fund transfers.
The FSC’s objective is clear: to leverage institutionalized data exchange to drastically reduce the time required to detect suspicious transactions, enabling financial entities to implement freezes, restrictions, and robust risk controls more swiftly.
Historically, a significant information gap existed, with banks monitoring only fiat currency flows and cryptocurrency exchanges observing solely on-chain crypto movements. This siloed approach was heavily exploited by fraudsters, who rapidly converted victim funds into virtual assets and subsequently moved them across borders via various addresses, making tracing incredibly challenging.
This legislative update effectively bridges the long-standing regulatory divide between fiat and crypto flows, marking the first time VASPs have been fully integrated into Taiwan’s national financial anti-fraud defense system.
Beyond Consultation: Expanding Anti-Fraud Platforms and Cementing Crypto’s Role in Financial Infrastructure
In parallel with the cross-industry consultation, the FSC has also refined the regulatory framework for cross-institutional anti-fraud platforms. Moving forward, any institution seeking to establish such a platform must apply to the FSC. These applications will require a clear delineation of the scope of customer information that participating entities can collect, process, and utilize, aiming to strike a crucial balance between personal data protection and the imperative to combat fraud.
Currently, key platforms are primarily developed and maintained by the Financial Information Service Co. (FISC) and the Joint Credit Information Center (JCIC). The future envisions banks, electronic payment institutions, and VASPs potentially serving as interconnected nodes within this expanded joint defense network. Another pivotal aspect is the deepening of inter-industry collaboration. The new regulations mandate that deposit institutions, electronic payment providers, and VASPs establish unified reporting procedures, specifically designed to halt the rapid flow of fraudulent funds between fiat and virtual assets.
Recent years have seen a surge in fraud cases where funds quickly bypassed traditional bank accounts, being converted into stablecoins like $USDT and subsequently routed to overseas blockchain addresses. Regulators, if confined to monitoring only the banking sector, could no longer effectively track these complex fund movements. This pivotal shift signifies that official authorities now formally recognize virtual assets as an integral component of the financial infrastructure, rather than merely an independent technological industry.
A Landmark Shift: Legal Sale of Seized Virtual Assets for Victim Restitution
Another significant amendment introduces a new mechanism for the restitution of remaining virtual assets to victims. In the past, when victim funds were converted into cryptocurrencies in fraud cases, the restitution process often stalled because many victims lacked cryptocurrency exchange accounts or the technical ability to receive digital assets.
Moreover, the volatile nature of virtual asset prices frequently led to disputes over the calculation of restitution amounts. To address these practical challenges, the FSC has now explicitly stipulated that VASPs are legally authorized to sell the remaining assets held within alerted virtual asset accounts. The proceeds from these sales will then be returned to victims in fiat currency.
Regulators anticipate that this new system will mitigate the risks associated with price fluctuations and significantly accelerate the restitution process for victims. This development also redefines the role of VASPs. Beyond their traditional function of providing trading services, exchanges will now bear greater responsibilities in judicial cooperation, asset preservation, and risk management. The very positioning of cryptocurrency platforms is steadily converging with that of traditional financial institutions.
Navigating the Path Ahead: Challenges and the Future of Bank-Crypto Collaboration
While the FSC is actively promoting cross-sector collaboration, the integration between banks and VASPs still faces several practical challenges. As early as 2023, CryptoCity reported on the FSC’s plans to include VASPs in the anti-fraud consultation mechanism, aiming to integrate bank fiat flows with exchange crypto flows for more effective tracking of suspicious transactions.
- Related News: Taiwan Exchanges to Join Anti-Fraud Efforts! FSC Plans to Integrate VASPs into Consultation, Linking Crypto and Fiat Flows
At that time, many cryptocurrency platform operators expressed their willingness to assist in anti-fraud efforts but highlighted a lack of clear legal authorization and immediate tools for intervention. This often resulted in situations where they “identified anomalies but were unable to act promptly.”
Traditional banks also face considerable pressure. Key challenges include distinguishing legitimate on-chain transactions from illicit ones, accurately assessing the risks associated with various crypto assets, and finding the delicate balance between information sharing and protecting personal data. These all present significant practical hurdles.
Furthermore, the wide disparities in technical capabilities, internal control standards, and resource scales among different VASPs could potentially impact the overall efficiency of this collaborative defense. Nevertheless, the direction of these latest amendments sends a clear message from official authorities: cryptocurrency platforms are no longer merely trading venues, but crucial nodes that must formally integrate into Taiwan’s comprehensive financial anti-fraud and anti-money laundering ecosystem.
(The above content is excerpted and reproduced with authorization from our partner “CryptoCity”, original link )
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