The Financial Supervisory Commission (FSC) has asked local financial institutions to refrain from trading cryptocurrencies, FSC Chairman Wellington Koo (顧立雄) said yesterday.
Cryptocurrencies are classified as a “highly speculative virtual commodity” and the asset class is not appropriate for local financial institutions, Koo said.
“We are aware that there are differing opinions as to whether cryptocurrencies are the next big innovation or the next catastrophic bubble,” Koo said, adding that the commission would step up efforts to inform the public about the volatility risks and to disseminate warnings and disclaimers.
While the commission remains open to innovations in the financial sector and retains a tolerant stance and hands-off approach to the emerging field of cryptocurrencies while monitoring its development across the globe, fraud and violations of banking and securities laws would be prosecuted, Koo said.
The commission also has no plans to develop bitcoin futures in Taiwan following precedents set in the US, he added.
However, Koo said that as cryptocurrencies are not considered a currency in the eyes of the central bank, online exchanges facilitating their trading fall outside the commission’s jurisdiction.
Koo’s comments came after lawmakers raised concerns about the increasing popularity of cryptocurrencies and urged the commission to take precautions and exercise greater scrutiny.
Following bitcoin’s meteoric rise this year, investments in cryptocurrencies have become more mainstream and could lead to massive losses for the investing public in the event of a market crash, the legislature’s Finance Committee said.
Investing in cryptocurrencies was a topic of conversation during his last visit to a barber shop, Chinese Nationalist Party (KMT) Legislator William Tseng (曾銘宗) said in describing the extent of the “bitcoin craze” in Taiwan.
Cryptocurrency trading has been moving to Taiwan and Japan following bans imposed earlier this year by authorities in China and Hong Kong, Tseng said, adding that China accounted for about 90 percent of bitcoin’s turnover last year.
The commission should look into Taiwan-based online platforms, such as MaiCoin and BitoEX (幣托), which have been facilitating cryptocurrency trading for local investors, Tseng said.
By working with banks, some of these platforms accept fiat money in exchange for cryptocurrencies, Tseng said.
“The commission needs to identify these banks and stop them from processing cryptocurrency-related transactions,” Tseng said, adding that the emerging asset class remains in a legal gray area and lacks regulation.
KMT legislators Lin Te-fu (林德福) and Alex Fai (費鴻泰) also raised concerns about initial coin offerings, where new cryptocurrencies raise funding in the form of legal tender or other cryptocurrencies in exchange for virtual tokens.
The issuance of virtual tokens that are designed to function as a security would be in violation of the nation’s securities laws, Fai said.
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