Taiwan, China, submits its "MiCA copy" of the EU's licensing system, officially kicking off the licensing war.

On July 1st, Taiwan's Legislative Yuan passed the Virtual Asset Service Act in its third reading. The core of the bill is not complicated: VASPs (Virtual Asset Service Providers) and stablecoin issuers must obtain approval from the Financial Supervisory Commission (FSC) to operate. Platforms that have completed anti-money laundering registration have 12 months to apply for a license and another 21 months to receive formal approval. Platforms and individuals that fail to obtain approval within the stipulated time and continue operating without proper authorization face up to 7 years imprisonment and a maximum fine of NT$100 million. Those involved in fraud or market manipulation face sentences ranging from 3 to 10 years and a maximum fine of NT$200 million. The "lease" in the gray area has expired. Over the past few years, Taiwan's crypto industry has lived in a very delicate space. As long as anti-money laundering registration is completed, platforms can attract users under the banner of "compliant operation." As for the hard hurdles like licenses, internal controls, and cybersecurity, regulators have never truly forced them to comply. This ambiguity has sustained a large number of small and medium-sized exchanges and shadow service providers. Their moat wasn't technology or financial strength, but information asymmetry and regulatory slowdown. Now, this moat has been filled. Taiwanese lawyer Kevin Cheng put it bluntly: those companies that survived by skirting regulations will no longer have a gray area to hide in. For ordinary investors, this means the next 21 months will be a process of revaluing trust. Which platforms are spending real money to obtain licenses and build internal controls, and which are quietly shrinking or even absconding—the answers will gradually emerge. Historical experience tells us that during every such window of opportunity, a number of exchanges choose "closing down is cheaper than complying." A Copy of MiCA If you find Taiwan's stablecoin rules familiar, you're right—they're almost a carbon copy of the EU's MiCA (Crypto-Assets Market Regulation Act). MiCA's core design for stablecoins rests on two ironclad rules. First, reserves must be adequate, segregated, and bankruptcy-segregated, requiring issuers to maintain sufficient reserves and ensure redemption mechanisms and operational security measures to prevent liquidity crises and bank runs. Second, interest payments to holders are prohibited. MiCA Article 50 directly prohibits electronic currency tokens from paying interest to holders. The reason is straightforward: to draw a clear line between payment functions and yield generation, preventing stablecoins from becoming disguised savings tools. Taiwan's legislation is almost a carbon copy of this approach—reserve funds must be held in custody by domestic financial institutions, segregated from common stock, and prioritized for repayment to holders in the event of bankruptcy, while issuers are prohibited from paying interest. This is not a coincidence; it reflects a global consensus among regulators on stablecoins. The "security standards" for the stablecoin sector have already been established by the EU. Taiwan is not innovating its regulations; it is simply copying a proven approach. MiCA's requirements for exchanges and service providers (CASPs) follow the same logic. White papers, financial reports, and operational details must be publicly disclosed according to regulatory standards to enhance market integrity and investor trust. For companies with serious violations, regulators have the right to permanently prohibit them from providing specific crypto assets or services. Taiwan's VASP licensing system, internal control requirements, and penalty design also follow this logic of "prove you deserve the license first, or you're permanently out." The real difference is that Taiwan has honed its regulatory tools to a level even sharper than the EU's. MiCA's penalties are largely administrative—freezing funds, revoking licenses, and imposing fines—a "shutting down" logic. Regulatory agencies can freeze funds suspected of violations or permanently ban companies from providing services, but there are no provisions for directly imprisoning unlicensed operators. Taiwan, however, has explicitly enshrined criminal liability in its law—unlicensed operation of VASPs or issuance of stablecoins carries a maximum of 7 years imprisonment; fraud or market manipulation carries 3 to 10 years. This is the fundamental difference. MiCA targets "companies," while Taiwan targets "people." For those accustomed to "fining the company and then changing the shell to continue operating," this path in Taiwan is directly blocked—people can go to jail, but the shell company cannot change its fate. In addition, MiCA provides member countries with some flexibility in the transition period. Germany, Austria, Ireland, and other countries have adopted a shorter transition window than the unified period, while the Netherlands and Poland have done so even earlier, resulting in a fragmented and gradual overall pace. Taiwan's 12-month application and 21-month approval process is a rigid timeline with no room for flexibility, creating a more compressed feeling. This law also opens another door, allowing traditional financial institutions to directly apply for VASP (Vendor Supported Platform) operations. Banks and securities firms, with their licenses, risk control teams, and compliance budgets, now have a legitimate entry ticket. Zheng Kairong's assessment is that existing crypto companies will soon face a new batch of competitors with "compliance capabilities far exceeding their own." The underlying financial logic is clear: the first beneficiaries of a newly implemented regulatory framework are often not existing industry players, but rather traditional capital waiting on the sidelines for the rules to become clear before entering the market. When the rules are unclear, independent teams can move quickly and seize market share; once the rules are clear, compliance costs become calculable, and large funds have an advantage – they are not afraid of being slow, but of uncertainty. Taiwan's legislation essentially removes the variable of "uncertainty" from the table and replaces it with the variable of "compliance costs." For existing Taiwanese crypto companies, this window of opportunity is their last chance to prepare. They must either complete their licensing, capital, and risk control systems before traditional financial institutions finish their deployments, establishing a first-mover advantage that is difficult for newcomers to replicate in the short term; or they must prepare to be acquired or pushed to the margins of the market. The Narrow Door to Derivatives: While tightening regulations, legislators have left a tiny crack. The resolution requires the Financial Supervisory Commission to submit a plan within a year to allow crypto companies to offer "cryptocurrency derivatives." This narrow door could be a key variable for the future. Spot trading volume is being diluted by compliance and divided among licensed giants. Derivatives—especially perpetual contracts and structured products—have always been the most profitable territory for offshore platforms. If compliant domestic platforms can obtain this license, it means that within the limited framework, they can operate businesses with higher leverage and provide risk hedging tools that complement traditional exchanges. The prerequisite is survival; they must endure the 21-month approval period. For many small and medium-sized platforms, their cash flow may not even be able to keep up with this countdown. Taiwan isn't inventing a new regulatory philosophy; it's simply adopting a proven EU model and tightening its enforcement. This puts Taiwanese businesses under double pressure—not only must they meet internationally recognized compliance standards, but they also face stricter criminal penalties than Europe. Conversely, this also signals that Taiwan isn't designing its own framework but directly aligning with MiCA's core provisions—adequate reserves, bankruptcy remoteness, and no interest payments. This "three-piece set" is becoming a universal benchmark for judging the reliability of a stablecoin issuer, rather than a European-only standard. However, the real turning point for Taiwan isn't how similar its rules are to MiCA, but that it's betting on "who survives until the license is granted first." The 21-month approval period is a sieve facing all players—platforms with ample cash reserves and the ability to withstand compliance costs can calmly obtain licenses and face direct competition from traditional financial institutions; smaller players with already tight cash flow will likely run out of funds before the licenses are issued. After the licenses are issued, who will survive and who will gain entry into the narrow gate of derivatives remains uncertain. Only one thing is certain: the next 21 months will be a shakeout of cash flow and endurance.