Taiwan is Tightening Regulations on Crypto Exchanges, Possible Pressure From China?
Taiwan has implemented new AML regulations on crypto exchanges. Was it influenced by China?
On November 2, Taiwan officially tightened anti-money laundering (AML) policies targeted at crypto exchanges, requesting exchanges to monitor and prevent any illegal transaction processed using digital assets.
According to the newly drafted Money Laundering Control Act and Terrorism Financing Prevention Act approved by the Legislative Yuan, one of the five branches of the Taiwanese government, the country’s Financial Supervisory Commission (FSC) now has authority over crypto exchanges to ban transactions suspected of being tied to fraudulent operations.
Taiwan’s Ministry of Justice (MoJ) released a statement following the approval of the new AML bill, emphasizing that the government is working towards meeting international AML standards by encouraging businesses to foster a “compliance culture and mindset.”
Until this year, the government of Taiwan was skeptical towards regulating the local cryptocurrency exchange market and blockchain sector.
South Korea, the third largest cryptocurrency exchange market, also refrained from implementing practical and efficient regulations to govern its local digital asset market until 2018, because it feared that investors would recognize it as a move to legitimize the cryptocurrency industry.
Based on its recently passed AML bill and the stance of the country’s main financial watchdog towards the cryptocurrency sector, Taiwan is likely leaning towards regulating its local cryptocurrency and blockchain space to prevent fraudulent operations and criminal activities using cryptocurrencies.
China’s complex relationship with Taiwan
For decades, Taiwan has had a complicated relationship with China. The official name of Taiwan is the Republic of China (RoC) and since the RoC's loss of the mainland to the People’s Republic of China (PRC) governed by the Communist Party of China, the PRC has consistently claimed sovereignty over Taiwan and said that the ROC is no longer in legal existence.
Although Taiwan has claimed to be the legitimate government of China, the loss of Hainan in 1950 has limited the jurisdiction of the Taiwanese government to Taiwan and its two outlying islands Quemoy and Matsu.
In recent years, mostly due to the increasing support of the U.S., the tension between Taiwan and China has continued to increase. On October 22, reports revealed that Taiwan is preparing to pitch for more U.S. arms and weaponry, after the U.S. approved the purchase of $330 million of arms sales to Taiwan in September.
Representatives of Taiwan, the U.S., and China had drastically contrasting viewpoints on the increasing arms sales from the U.S. to Taiwan.
Lo Chih-cheng, a ruling-party lawmaker on the parliament’s defense committee, said that regardless of the relationship between Taiwan and China, the government of Taiwan must possess credible defense and sufficient weapons to defend the region from potential attacks:
“In the worst case, we have only ourselves to rely on. We should not be so dependent on the U.S. in the long term. But we still need to buy weapons from the U.S. to secure our defenses while we are building our capabilities.”
The Institute for National Defense and Security Research, an organization funded by Taiwan’s defense ministry, noted that the established conflict between the U.S. and China was “a strategic window of opportunity for Taiwan” to build a strong defense system to protect the region.
However, the government of China fiercely opposed the arms sales of the U.S. to Taiwan. The foreign ministry in Beijing said in June of last year that the $1.4 billion deal had “severely damaged China’s security and sovereignty,” describing Taiwan as an “indispensable part of China’s territory.”
At the time, Michael Kovrig of International Crisis Group said, “if this is, in fact, intentional timing, this does represent a change of tone. The Americans would clearl