FSC has made a move. Next year, it will promote the 'virtual asset custody business', with 5 banks reportedly interested in applying.

In response to international trends, the FSC has opened a trial for the custody of virtual assets.

The Financial Supervisory Commission of Taiwan (referred to as the FSC) announced on November 28 that it will launch a thematic trial for 'virtual asset custody business,' and will start accepting applications from Financial Institutions from January 1, 2025. This policy aims to comply with the international trend of virtual asset business development, promote the development of safe and reliable virtual asset custody services for Financial Institutions, and support domestic financial innovation development.

According to the Financial Supervisory Commission, there are currently 5 privately-owned banks expressing their intention to apply. The trial period is 6 months, with an approximate review period of 2 months. If the submission is made in January next year and the documents are complete, the first bank is expected to officially trial virtual asset custody business in the first half of the year. This not only symbolizes an important milestone for Taiwan's financial technology, but also demonstrates the regulatory authority's open attitude towards the emerging financial industry.

Detailed Explanation of the Scope of Virtual Asset Custody and Application Conditions

The FSC emphasizes that the scope of the trial "virtual asset custody" business is limited to virtual currency, such as BTC, Ethercoin, and other cryptocurrencies, and does not include asset tokenization (RWA) and non-fungible tokens (NFTs). Applicants are required to provide detailed information in seven categories, including custody mode, customer service planning, regulatory compliance, organizational management, security planning, asset segregation, and financial accounting systems.

The applicants are quite wide-ranging, including not only traditional banks, Financial Institutions, but also can cooperate with financial technology companies. The FSC indicated that there are no strict qualifications for applicants, mainly focusing on evaluating their security and risk management capabilities. Potential customers are mainly 26 domestic Virtual Asset Service Providers (VASPs) that have completed Money Laundering compliance declarations. If there is a need to custody foreign VASP operators, applications can also be submitted.

Financial institutions interested in participating can now submit counseling requests to the FSC. The official trial application period will be from January 1, 2025 to April 30. At that time, the FSC will conduct a review of the applications for about 2 months and announce the list of approved institutions after the review.

For more complete information, you can refer to the explanatory materials provided by the Financial Supervisory Commission on the 'Trial Operation of Themed Business for Virtual Asset Custody Services'. The key points are also summarized in the following figure of [encryption City].

Source: "Encryption City" mapping Overview of "Virtual Asset Custody Business"

A longer win-win financial innovation model

This policy brings multiple benefits to banks, Virtual Moneyexchange and investors. For banks, it is not only expected to increase fee income, but also explore emerging business opportunities in the virtual asset industry through this "starting point". International experience shows that banks usually charge fees based on a certain percentage of the size of assets under custody, opening up new revenue channels for financial institutions.

For cryptocurrency exchanges, entrusting some virtual currencies to third-party custody can significantly enhance operational security. In the virtual asset custody model, banks can adopt two main approaches:

First, keep the customer's Private Key, put similar series of alphanumeric key certificates into physical safe deposit box or USB;

Secondly, the use of Algorithm to store Private Key is involved in complex technology and security standards, which traditional banks are more cautious about.

For investors, the involvement of banks will significantly increase the trustworthiness of virtual asset platforms, making transactions more secure. In addition, the Financial Supervisory Commission emphasized that the results and experiences of this trial will serve as important references for future formulation of relevant regulations and policy promotion.

In the face of the rapid development of encryption assets worldwide, the move by the Taiwan financial regulatory authorities is undoubtedly a shot in the arm for the domestic virtual asset ecosystem, and is expected to further consolidate Taiwan's position as a hub for financial technology innovation in Asia.

[Disclaimer] The market is risky, and investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, perspectives, or conclusions in this article are suitable for their specific situation. Investing based on this is at your own risk.

The Financial Supervisory Commission has taken action, and will launch the 'virtual asset custody business' next year. It is rumored that 5 banks are interested in applying for it. This article was first published in 'encryption City'.