In a groundbreaking development, Taiwan is poised to embrace Bitcoin as an official currency, becoming the world’s second nation, following in the footsteps of El Salvador. This historic verdict emerged from the Legislative Yuan, Taiwan’s unicameral legislature, after a fiercely contested debate culminated in a close vote on October 30, 2023.
At the heart of this transformative shift is the “Digital Currency Legalization and Regulation Act.” This pivotal legislation seeks to establish a robust legal framework governing the use, exchange, taxation, and oversight of Bitcoin and other cryptocurrencies within Taiwan’s borders. Importantly, it formally designates Bitcoin as a foreign currency for international trade and exchange purposes.
Under the provisions of this bill, Bitcoin assumes the status of a legally recognized medium of exchange for both public and private transactions within Taiwan. It also garners recognition as a store of value and a unit of account. However, it should be noted that the bill places stringent requirements on all individuals and enterprises dealing with Bitcoin. They must duly register with the Financial Supervisory Commission (FSC), the principal financial regulatory authority in Taiwan, and adhere to anti-money laundering and counter-terrorism financing protocols.
Notably, the FSC is endowed with the authority to issue licenses for cryptocurrency exchanges, custodial services, mining operations, and related businesses. Furthermore, it holds the responsibility of crafting the standards and guidelines to ensure the security, transparency, and consumer protection of Taiwan’s burgeoning cryptocurrency industry.
The bill’s inception can be attributed to a coalition of lawmakers from diverse political affiliations, spearheaded by Chen Chih-Chung, a member of the ruling Democratic Progressive Party (DPP) and the son of former President Chen Shui-bian. Chen Chih-Chung expressed the motivation behind the legislation, stating that it seeks to align Taiwan with the global trajectory of digitalization and innovation while bolstering the nation’s economic prowess and competitiveness.
“Bitcoin is not merely a technological breakthrough but a socio-economic revolution. By conferring legal tender status upon Bitcoin, we unlock new prospects for our citizens, businesses, and our nation. This action also signals Taiwan’s leadership in digital transformation and its unwavering commitment to freedom and democracy,” asserted Chen Chih-Chung during a post-bill passage press conference.
The response to this momentous decision has been mixed, with both proponents and detractors making their voices heard. Advocates commend it as a visionary step that will position Taiwan at the forefront of the cryptocurrency industry, attracting increased foreign investment and talent. In contrast, critics view it as a risky and imprudent move that could expose Taiwan to financial instability, cyber threats, fraud, and money laundering.
In addition to these concerns, the bill has encountered staunch opposition from China, which claims Taiwan as its territory and has been exerting military and diplomatic pressure on the island. China banned all forms of cryptocurrency trading and mining in 2017 and has repeatedly cautioned Taiwan against actions that challenge its sovereignty or undermine the “one China” policy.
China’s Foreign Ministry spokesperson, Zhao Lijian, has decried Taiwan’s decision to embrace Bitcoin as a legal tender, labeling it a “provocative and illegal act” that poses a grave threat to cross-strait relations and regional peace and stability. Zhao Lijian has also urged the international community to “reject and sanction” what he views as Taiwan’s “separatist” actions.
Nevertheless, Taiwan’s President, Tsai Ing-Wen, has staunchly defended the legislation as a sovereign and democratic choice of the Taiwanese people, pledging that Taiwan will not yield to China’s threats or interference. She also expressed confidence that Taiwan is well-prepared to navigate any challenges or risks that may arise from adopting Bitcoin as an official currency.
“Taiwan is a society that values freedom and innovation. We embrace change and confront challenges without fear. We believe that Bitcoin can bring positive transformations to our economy, society, and culture. It can also fortify our bonds with friends and allies worldwide who share our values and vision,” remarked Tsai Ing-Wen in a televised national address.
The bill is scheduled to come into effect on January 1, 2024, following a two-month period of public consultation and preparation. The FSC has committed to releasing comprehensive regulations and guidelines for the bill’s implementation by year-end.