Taiwan Wants to Ban Credit Card Usage for Crypto Purchases
- Taiwan government’s financial watchdog has instructed banks to shut down accounts belonging to crypto firms.
Taiwan government’s financial supervisory commission (FSC) looks set to ban crypto purchases with credit cards. According to a report by a local media outlet, the Economic Daily, on Friday, the FSC had sent a warning notice to banks earlier this month. In the letter, the FSC reminded banks of digital assets’ highly speculative and risky nature.
The financial regulator also expressed concern about the complexity of cash flows and the difficulty in effectively monitoring transactions. It also gave credit firms 90 days to comply with the new directives. The FSC explained that credit cards should be strictly consumer payment tools.
They shouldn’t be payment tools for highly speculative, high financial leverage, and high-risk transactions. Also, they can’t be payment tools for wealth management and investment purposes. The financial watchdog also restated that it had previously banned credit cards as payment tools for options, futures, stocks, online gambling, and similar transactions.
Taiwan and the Crypto Market
The crypto market has been declining since January 2022, with many institutional investors selling their digital assets and exiting the industry. However, most authorities have been concerned that it would encourage money laundering. Hence, the reason for the letter from the FSC to the association of banks in Taiwan. It is for the same reason that many other governments are facilitating the establishment of a crypto regulatory framework.
In the letter, the FSC gave three conditions. Credit card firms must not have virtual asset service providers (VASPs) as customers. VASPs include crypto exchanges and crypto platforms. Also, sellers in ‘special stores’ must not include VASPs. Lastly, credit card firms must include the above two requirements in their internal audit and control policy.
The FSC added that the audit unit of these credit firms must review the companies’ internal compliance policy after the next 90 days. Then, give a detailed review report at the next meeting with the FSC. Taiwan became the destination of choice for most crypto firms following China’s ban on all crypto-related activities last year.
That led many industry experts to predict that the Asian country would soon be a huge crypto hub. However, that hasn’t happened yet, as Dubai seems to have become the destination of choice for most crypto firms. Twelve months ago, Taiwan released a modified anti-money laundering policy for virtual asset providers.
The modification was based on recommendations from the Financial Action Task Force (FATF). Taiwan is already trying to launch its central bank digital currency (CBDC). Currently, its CBDC pilot program is at its second stage. In this stage, the apex bank will select five local banks to distribute the CBDC among its clients.
Last month, Taiwan’s central bank governor, chin-long yang, suggested an interest-free CBDC design. Yang said that if depositors of the CBDC pay interest, the digital asset would soon replace the country’s fiat in banks.