Taiwan is gearing up to launch a digital asset custody pilot program for banks in 2025, as reported by local media on October 8. This initiative is part of the country’s larger strategy to promote financial innovation and is in line with plans to introduce comprehensive legislation for the digital asset industry by the end of 2024.
The Financial Supervisory Commission (FSC) will be overseeing this pilot program, which aims to allow banks to securely store digital assets such as cryptocurrencies on behalf of their clients. Hu Zehua, Director of the FSC’s Comprehensive Planning Department, explained the process during a recent press conference.
Three banks have already shown interest in participating in this program, which will kick off with a 15-day consultation period to gather feedback from the public. After this, the FSC will finalize the details and announce when applications for the pilot program will be accepted.
While some securities firms have also expressed interest, the FSC is prioritizing banks due to their larger capital reserves, which can better meet the security requirements for handling digital assets. Security is a key focus for the FSC, as institutions dealing with digital currencies must have robust safeguards in place to protect potentially significant sums of money.
In addition to security measures, the FSC will enforce strict anti-money laundering (AML) protocols to prevent the influx of illegal funds into the system and minimize the risk of asset seizures. Financial institutions looking to participate in the pilot program will need to specify the virtual assets they plan to manage, such as Bitcoin, Ethereum, or Dogecoin, as well as outline their target clientele, which could include virtual asset platforms, professional investors, or retail clients.
Traditionally, banks globally have prioritized serving virtual asset exchanges before expanding their services to institutional investors, with retail investors typically being catered to at a later stage. Taiwan’s initiative to support virtual asset services underscores the government’s dedication to financial innovation while upholding stringent safety and regulatory standards.
This move by Taiwan is expected to pave the way for increased participation by major financial institutions in the digital asset space, positioning the country as a leader in fostering innovation within the financial sector. As the pilot program unfolds in 2025, it will be interesting to see how banks navigate the complexities of digital asset custody while upholding the highest standards of security and compliance.