The Financial Supervisory Commission (FSC) on Monday told lawmakers that it is considering requiring local cryptocurrency exchanges to keep their digital currency holdings separate from those owned and deposited by clients, as it seeks to regulate the business and protect investors in the wake of FTX’s collapse.
Having filed for US bankruptcy court protection, foreign cryptocurrency exchange FTX said that it had recovered and secured US$740 million in crypto assets — a fraction of the potentially billions of US dollars likely missing from the company — with many FTX customers worried that they could never get their money back.
FSC Chairman Thomas Huang (黃天牧) told a meeting of the legislature’s Finance Committee that the commission, which usually focuses on combating money laundering on cryptocurrency exchanges, would tighten regulations governing investor protection and asset separation.
Photo: Reuters
Cryptocurrencies are not traditional financial products, and global financial regulators are still evaluating whether the virtual assets bear contagion risk, with the crisis in the cryptomarket spreading to conventional financial markets, Huang said.
The FSC is considering requiring local cryptocurrency exchanges to isolate their holdings from those owned and saved by their users, to avoid affecting their consumers should a cryptocurrency exchange go belly up, the commission said.
It has not decided whether it would establish a special act on the industry, Huang told lawmakers.
Wayne Huang (黃耀文), CEO of XREX Inc (鏈科), which provides blockchain cross-border payment solutions, said that he agreed with the commission.
Asset separation should be fundamental for any cryptocurrency exchange, he told the Taipei Times by telephone.
“Any cryptocurrency exchange that operates decently should have separated the coins and stuck to the principle of separation. An exchange that secretly uses its clients’ cryptocurrencies to fund its own investments or activities is committing a crime,” he said.
Failure to separate assets is one of the major causes of FTX’s downfall, he said.
Cryptocurrency exchange MaiCoin Ltd (現代財富科技) CEO Alex Liu (劉世偉) urged the FSC to reach out and ask offshore cryptocurrency exchanges to comply with its regulations.
“Given that the amount of losses incurred by Taiwanese investors is estimated to run into hundreds of millions of US dollars, the time has come for Taiwanese regulators to present offshore platforms such as FTX and Binance a simple choice — comply with Taiwanese consumer protection and financial regulations, or stop serving Taiwanese,” Liu told the Taipei Times by telephone.
This is the path that regulators in Singapore, the UK and the US follow, Liu added.
“FTX’s downfall shows that doing nothing is no longer an option for the FSC, which has a responsibility to take care of local investors,” Liu said.
“A poor internal labeling of bank-related accounts means that I was substantially off on my sense of users’ margin. I thought it was lower,” FTX founder and former CEO Sam Bankman-Fried wrote on Twitter.
In other words, Bankman-Fried implicitly admitted that FTX used its clients’ funds, but he claimed that it was just a result of accounting errors, Wayne Huang said.
“It seems that the exchange had no internal audit or controls, or any external audits that could have helped it prevent mistakes,” and Bankman-Fried’s claim would be scrutinized by the legal system, he said.
Local cryptocurrency exchanges operating as a centralized system should be regulated by the government so that investors can be protected and the government can also be exchanges’ lender of last resort, he said.
However, Taiwanese accounting firms have reservations about auditing cryptocurrency exchanges, as they lack the talent or expertise in dealing with the blockchain or crypto, he said.
As such, the government should make a solid and comprehensive plan to boost governance, he added.
CAUTIOUS RECOVERY: While the manufacturing sector returned to growth amid the US-China trade truce, firms remain wary as uncertainty clouds the outlook, the CIER said The local manufacturing sector returned to expansion last month, as the official purchasing managers’ index (PMI) rose 2.1 points to 51.0, driven by a temporary easing in US-China trade tensions, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The PMI gauges the health of the manufacturing industry, with readings above 50 indicating expansion and those below 50 signaling contraction. “Firms are not as pessimistic as they were in April, but they remain far from optimistic,” CIER president Lien Hsien-ming (連賢明) said at a news conference. The full impact of US tariff decisions is unlikely to become clear until later this month
GROWING CONCERN: Some senior Trump administration officials opposed the UAE expansion over fears that another TSMC project could jeopardize its US investment Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is evaluating building an advanced production facility in the United Arab Emirates (UAE) and has discussed the possibility with officials in US President Donald Trump’s administration, people familiar with the matter said, in a potentially major bet on the Middle East that would only come to fruition with Washington’s approval. The company has had multiple meetings in the past few months with US Special Envoy to the Middle East Steve Witkoff and officials from MGX, an influential investment vehicle overseen by the UAE president’s brother, the people said. The conversations are a continuation of talks that
CHIP DUTIES: TSMC said it voiced its concerns to Washington about tariffs, telling the US commerce department that it wants ‘fair treatment’ to protect its competitiveness Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reiterated robust business prospects for this year as strong artificial intelligence (AI) chip demand from Nvidia Corp and other customers would absorb the impacts of US tariffs. “The impact of tariffs would be indirect, as the custom tax is the importers’ responsibility, not the exporters,” TSMC chairman and chief executive officer C.C. Wei (魏哲家) said at the chipmaker’s annual shareholders’ meeting in Hsinchu City. TSMC’s business could be affected if people become reluctant to buy electronics due to inflated prices, Wei said. In addition, the chipmaker has voiced its concern to the US Department of Commerce
STILL LOADED: Last year’s richest person, Quanta Computer Inc chairman Barry Lam, dropped to second place despite an 8 percent increase in his wealth to US$12.6 billion Staff writer, with CNA Daniel Tsai (蔡明忠) and Richard Tsai (蔡明興), the brothers who run Fubon Group (富邦集團), topped the Forbes list of Taiwan’s 50 richest people this year, released on Wednesday in New York. The magazine said that a stronger New Taiwan dollar pushed the combined wealth of Taiwan’s 50 richest people up 13 percent, from US$174 billion to US$197 billion, with 36 of the people on the list seeing their wealth increase. That came as Taiwan’s economy grew 4.6 percent last year, its fastest pace in three years, driven by the strong performance of the semiconductor industry, the magazine said. The Tsai
RSS