In the keynote speech, Linda believed that the revolution of blockchain technology is that hundreds of millions of validators share a transparent and immutable common ledger, and blockchain is a universal clearing and settlement layer. The principle of constraints and balance is very critical to use blockchain and cryptography in the digital age. Bank note has been digitized and is programmable. Our personal digital identities and data are becoming the target of cybersecurity attacks. The decentralized digital identity systems controlled by multiple parties are better able to resist attacks. Taiwan is a global leader in digital infrastructure and a pluralistic democracy. The new digital era is a key opportunity for Taiwan to become a global leader, to contribute to the establishment of a democratic and pluralistic identity layer of the next generation of Internet Web3, and to have an immeasurable impact on social governance and the development of civilization.
The panel discussion was moderated by Dr. Chinwen Wu, Director of Financial Innovation and Technological Revolution Center of NCCU Law School. Damien talked about his thoughts on appropriate regulation from the perspective of platform operators. Referring to Binance’s global experience, the regulatory design of virtual assets must take into account that crypto Asset is directly popularized to individual investors in the early stage of issuance, and gradually enterprises and government institutions participate. Whether there is a specific law or not, Damien supports the exclusive supervision guides. The authority should recognize the uniqueness of crypto assets such as the application of new technologies and cross-border with no time difference, to effectively identify and manage key risks, to provide practitioners with clarity on legal compliance. At the same time, the authority should closely align with international partners to promote cross-border cooperation.
According to the regulatory experience of various countries, there are key points: (1) managing by hierarchy with differentiation, (2)meeting the expectations of publics, (3)Implementing by phases, for example, Korea is to take consumer protection first, and the other operation issues are considered later, (4) identifying key risks and supervising by principle, (5) Establishing a special team recruiting experts from financial, technology, network and other backgrounds, as Korea does, (6)Always be flexible and extensible to cope with the rapid development of technology iteration.
Mr. Ko is an expert legislator with experience in technology development and industry. Mr. Ko believed the special law is not a panacea. The special law should take into account the due conditions such as sufficient tools for substantive management, legislators and enforcers understand correctly as well as when the time is ripe. In September 2023, Financial Supervisory Commission (FSC) issued the Guidance for a Risk-based Approach of Virtual Asset Service Providers (VASPs), focusing on money laundering prevention through existing financial supervision methods such as routine supervision and financial inspections. Mr. Ko said that important progress on the legislative front has been made and will continue to work to, (1) Believe that science and technology are rational and neutral. Legislators should be more active in embracing technological changes in order to improve social efficiency and people's well-being. (2) Accelerate the process of CBDC. (3) Regulate NFT non-fungible cryptocurrencies to be included in the special law on anti-fraud. (4) Consider Bitcoin ETF to be opened up: FSC has announced that it might consider opening up public purchases under certain restrictions. (5) Diversify development: FSC is in charge of both supervising and developing the financial market and industry. Diversified development should include activities both real world and virtual, even AI implementation and new technology application in financial fields, should be more open and in line with international tolerance of more diversified competition for long term development.
Attorney Eddie Hsiung, a partner lawyer of Lee and Li Law Firm, shared his views from the perspective of legal regulation. In 2021, FSC adopted the framework of the Money Laundering Control Act and the compliance declaration system to manage the industry operators, and 26 companies have passed it for now. Last month, the VASP Association was established and began to draft a self-regulatory code for industry operators. It is expected that the guidelines issued by FSC will be incorporated. It is also worth noting that the Anti-Money Laundering Law has just been amended in July. The new provision is that business operators have to apply to FSC for the license. The core point is that the Law has been reclassified as a criminal law norm. Violations of the law are subject to criminal liability. Mr. Hsiung said that if the special law is amended, a licensing system issued by FSC can be considered. Referring to Japan, Singapore and EU MICA, like the regulation of traditional finance, the special law should mainly include consumer protection, information disclosure, separation of business and customer assets, etc.
QA session
The question is from Professor Tsang Chengyun of Manash University in Melbourne. Professor Tsang also is the visiting researcher of FINTEC NCCU Law School. He asked what important legal and supervisory issues need to be considered in the development of RWA in Taiwan? According to experience of other countries, what are the supervision concerns if Taiwan's commercial banks engage in the custody of virtual currency?
Damien said that RWA has the characteristics of high transparency, good liquidity, high efficiency, low cost, and no time difference across countries by adapting new technology. However, it is important to assume that the physical assets have the value of securitization. At the same time, there must be sufficient incentives for all parties involved in the existing transaction. Perhaps a work of art or real estate with low liquidity and high physical asset value is a target asset subject matter for RWA. Linda shared that the Uniform Commercial Code (UCC, the Code) in United States has just amended Article 12 to specify that the ownership of money belongs to the person who can control, but how to define "control"? Do I have a private key? In fact, this is not a good solution, and the industry is also working on an alternative to private keys that is simpler with better customer experience. Linda then added that when tokenization, it is necessary to consider whether the private commercial law needs to be amended. For example, it is necessary to specify the content of participation rights in either contract, or agreement, or terms and conditions to regulate the rights and obligations of all parties. The current law cannot keep up with the development of technology. Mr. Ko said that FSC's is very positive towards RWA. The passage of the electronic signature law is one of the important momentums. In response to the challenges arising from tokenization, such as how to keep private keys and how to ensure the proper division of rights and obligations when multiple people hold them together, are important issues. Therefore, it is very important for FSC open the custody to the bank. Perhaps it is more prudent that bank has a wholly-owned subsidiary in the initial stage to isolate the risk of the custody business from the original business of the bank. Mr. Hsiung suggest to focus on real-world applications and behaviors, rather than technology. The issuance, trading, transfer of tokens are actually similar to the activities of TDCC on the blockchain, which can be referred to as the formulation of relevant specifications and responsible institutions.
The forum is co-organized by Financial Innovation and Technological Evolution Center of NCCU, Zhinan Cultural and Educational Foundation of Law of NCCU and Binance Academy. Special thanks to National Credit Card Center of R.O.C.for the sponsorship.
The panel discussion was moderated by Dr. Chinwen Wu, Director of Financial Innovation and Technological Revolution Center of NCCU Law School. Damien talked about his thoughts on appropriate regulation from the perspective of platform operators. Referring to Binance’s global experience, the regulatory design of virtual assets must take into account that crypto Asset is directly popularized to individual investors in the early stage of issuance, and gradually enterprises and government institutions participate. Whether there is a specific law or not, Damien supports the exclusive supervision guides. The authority should recognize the uniqueness of crypto assets such as the application of new technologies and cross-border with no time difference, to effectively identify and manage key risks, to provide practitioners with clarity on legal compliance. At the same time, the authority should closely align with international partners to promote cross-border cooperation.
According to the regulatory experience of various countries, there are key points: (1) managing by hierarchy with differentiation, (2)meeting the expectations of publics, (3)Implementing by phases, for example, Korea is to take consumer protection first, and the other operation issues are considered later, (4) identifying key risks and supervising by principle, (5) Establishing a special team recruiting experts from financial, technology, network and other backgrounds, as Korea does, (6)Always be flexible and extensible to cope with the rapid development of technology iteration.
Mr. Ko is an expert legislator with experience in technology development and industry. Mr. Ko believed the special law is not a panacea. The special law should take into account the due conditions such as sufficient tools for substantive management, legislators and enforcers understand correctly as well as when the time is ripe. In September 2023, Financial Supervisory Commission (FSC) issued the Guidance for a Risk-based Approach of Virtual Asset Service Providers (VASPs), focusing on money laundering prevention through existing financial supervision methods such as routine supervision and financial inspections. Mr. Ko said that important progress on the legislative front has been made and will continue to work to, (1) Believe that science and technology are rational and neutral. Legislators should be more active in embracing technological changes in order to improve social efficiency and people's well-being. (2) Accelerate the process of CBDC. (3) Regulate NFT non-fungible cryptocurrencies to be included in the special law on anti-fraud. (4) Consider Bitcoin ETF to be opened up: FSC has announced that it might consider opening up public purchases under certain restrictions. (5) Diversify development: FSC is in charge of both supervising and developing the financial market and industry. Diversified development should include activities both real world and virtual, even AI implementation and new technology application in financial fields, should be more open and in line with international tolerance of more diversified competition for long term development.
Attorney Eddie Hsiung, a partner lawyer of Lee and Li Law Firm, shared his views from the perspective of legal regulation. In 2021, FSC adopted the framework of the Money Laundering Control Act and the compliance declaration system to manage the industry operators, and 26 companies have passed it for now. Last month, the VASP Association was established and began to draft a self-regulatory code for industry operators. It is expected that the guidelines issued by FSC will be incorporated. It is also worth noting that the Anti-Money Laundering Law has just been amended in July. The new provision is that business operators have to apply to FSC for the license. The core point is that the Law has been reclassified as a criminal law norm. Violations of the law are subject to criminal liability. Mr. Hsiung said that if the special law is amended, a licensing system issued by FSC can be considered. Referring to Japan, Singapore and EU MICA, like the regulation of traditional finance, the special law should mainly include consumer protection, information disclosure, separation of business and customer assets, etc.
QA session
The question is from Professor Tsang Chengyun of Manash University in Melbourne. Professor Tsang also is the visiting researcher of FINTEC NCCU Law School. He asked what important legal and supervisory issues need to be considered in the development of RWA in Taiwan? According to experience of other countries, what are the supervision concerns if Taiwan's commercial banks engage in the custody of virtual currency?
Damien said that RWA has the characteristics of high transparency, good liquidity, high efficiency, low cost, and no time difference across countries by adapting new technology. However, it is important to assume that the physical assets have the value of securitization. At the same time, there must be sufficient incentives for all parties involved in the existing transaction. Perhaps a work of art or real estate with low liquidity and high physical asset value is a target asset subject matter for RWA. Linda shared that the Uniform Commercial Code (UCC, the Code) in United States has just amended Article 12 to specify that the ownership of money belongs to the person who can control, but how to define "control"? Do I have a private key? In fact, this is not a good solution, and the industry is also working on an alternative to private keys that is simpler with better customer experience. Linda then added that when tokenization, it is necessary to consider whether the private commercial law needs to be amended. For example, it is necessary to specify the content of participation rights in either contract, or agreement, or terms and conditions to regulate the rights and obligations of all parties. The current law cannot keep up with the development of technology. Mr. Ko said that FSC's is very positive towards RWA. The passage of the electronic signature law is one of the important momentums. In response to the challenges arising from tokenization, such as how to keep private keys and how to ensure the proper division of rights and obligations when multiple people hold them together, are important issues. Therefore, it is very important for FSC open the custody to the bank. Perhaps it is more prudent that bank has a wholly-owned subsidiary in the initial stage to isolate the risk of the custody business from the original business of the bank. Mr. Hsiung suggest to focus on real-world applications and behaviors, rather than technology. The issuance, trading, transfer of tokens are actually similar to the activities of TDCC on the blockchain, which can be referred to as the formulation of relevant specifications and responsible institutions.
The forum is co-organized by Financial Innovation and Technological Evolution Center of NCCU, Zhinan Cultural and Educational Foundation of Law of NCCU and Binance Academy. Special thanks to National Credit Card Center of R.O.C.for the sponsorship.
