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Is Taiwan reinforcing cryptology exchanges, possible pressures from China?

On November 2, Taiwan officially strengthened anti-money laundering (AML) policies aimed at cryptographic exchanges, requiring exchanges to monitor and prevent any illegal transactions processed using digital resources.

According to the new law on money laundering control and the law for the prevention of terrorist financing 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 cryptographic exchanges to prohibit suspicious transactions from being linked to fraudulent transactions.

The Taiwan Ministry of Justice (MoJ) issued a statement following the approval of the new AML bill, underlining that the government is working to meet international AML standards by encouraging companies to promote a "culture of compliance and mentality".

Until this year, the Taiwanese government was skeptical of the regulation of the local cryptocurrency exchange market and the blockchain sector.

South Korea, the third largest cryptocurrant exchange market, has also refrained from enacting 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 sector.

Based on its recently approved bill and the position of the country's main financial controller for the cryptocurrency sector, Taiwan is probably working to regulate its local cryptocurrency and blockchain space to prevent fraudulent operations and criminal activities using cryptocurrencies.

The complex relationship of China with Taiwan

For decades, Taiwan has had a complicated relationship with China. The official name of Taiwan is the Republic of China (RoC) and the loss of the continent to the People's Republic of China (PRC) governed by the Chinese Communist Party, the People's Republic of China has repeatedly claimed sovereignty over Taiwan and has stated that the ROC is not more in legal existence.

Although Taiwan claimed to be China's legitimate government, the loss of Hainan in the 1950s limited the jurisdiction of the Taiwanese government to Taiwan and its two peripheral islands, Quemoy and Matsu.

In recent years, mainly due to the growing support of the United States, the tension between Taiwan and China has continued to increase. On October 22, reports revealed that Taiwan is preparing to present more weapons and weapons in the United States, after the United States approved the purchase of $ 330 million of arms sales to Taiwan in September.

Representatives from Taiwan, the United States and China have sharply opposed the views on the growing arms sales from the United States to Taiwan.

Chih-cheng, a parliamentary member of the ruling party in the parliament's defense committee, said that regardless of the relationship between Taiwan and China, the Taiwanese government must possess credible defense and sufficient weapons to defend the region from potential attacks:

"In the worst case, we have to rely only on ourselves, we should not be so dependent on the US in the long run, but we still need to buy weapons from the US to protect our defenses while we are building our capabilities."

The National Defense Institute and Security Research, an organization funded by the Taiwan Defense Ministry, noted that the conflict established between the United States and China was "a strategic window of opportunity for Taiwan" to build a strong defense system to protect the region.

However, the Chinese government fiercely opposed US arms sales to Taiwan. The Ministry of Foreign Affairs in Beijing declared in June last year that the $ 1.4 billion deal "has severely damaged Chinese security and sovereignty", describing Taiwan as "an indispensable part of Chinese territory".

At the time, Michael Kovrig of the International Crisis Group stated: "if this is, in reality, intentional timing, this represents a change of tone.The Americans would be clearly aware that this would irritate the Chinese. to save face, "adding that any further arms sales to Taiwan could worsen the relationship between the United States and Taiwan.

Has China had any impact on the new AML bill?

At a time when Chinese mainstream media and state-supported publications accuse US President Donald Trump of playing high-stakes in support of Taiwan, any activity to fuel the already heightened tension between the US, Taiwan and China it could lead to serious international conflicts and what the Chinese government calls "disastrous consequences". The China Daily editorial reported on October 24:

"The military hawks in Washington have tried to scare Beijing and console Taipei, but they should consider the terrible consequences of their country dragged into an expensive clash that, in the first place, would be useless and avoidable."

One of the few common areas on which the Taiwanese government and China agree is the prevention of money laundering through the use of electronic payment systems, including cryptocurrencies.

Recently, in an attempt to completely ban money laundering efforts and fraudulent activities in the global cryptocurrency sector, the Japanese government has also called for the establishment of standardized AML regulations on cryptocurrencies, in particular regarding anonymous cryptocurrencies like Monero. , Zcash and Dash. An FSA official said on October 24:

"It should be seriously questioned whether any registered cryptocurrency should be allowed to use such currencies.It is almost impossible for Japan to handle the problem alone, even though trade is limited to national transfers alone or monitoring has improved, it is not still sufficient to counter money laundering, it would be better if the whole group of 20 industrial and emerging nations and regions (G20) took the same steps towards prevention ".

In recent months, led by Taiwan legislator and Congressman Jason Hsu, the Taiwanese government has demonstrated a more proactive and open approach to regulating the local cryptocurrency market.

In an interview, Hsu explained that a parliamentary coalition had been set up in Taiwan to focus on blockchain and cryptography regulation with a series of guidelines aimed at the cryptocurrency trade. He added that Taiwan is ready to cooperate with Japan, South Korea, Singapore, Hong Kong and other Asian countries to facilitate the growth of the local cryptocurrency space.

So rather than China's direct impact on Taiwan, a collective effort by the legislators and the Taiwan Congress to regulate the country's cryptocurrency space most likely led to changes in the new AML bill.

"We have created a parliamentary coalition in the Taiwan parliament for the blockchain, which is a bipartisan alliance designed to help support industry, I have also started self-regulatory organizations for blockchain and crypto, where we are working together to elaborate a set of guidelines for the regulation of exchanges These guidelines will provide the basic parameters on how cryptographic exchanges and other taxes are defined.When we announce the guidelines in the coming weeks, it will be a regional consensus with Taiwan, Japan and Korea , Singapore, Hong Kong and other Asian countries ".

Legislator and member of the Taiwan Congress, Jason Hsu

Even China is able to protect cryptography to a certain extent

China officially banned cryptocurrency trading in September 2017, expressing concerns about money laundering and capital control. The government has limited the outflow of the Chinese yuan to foreign markets for decades, and through exchanges, investors have been able to bring capital out of the local market before the ban.

As widely reported by Cointelegraph, the government has actively banned almost every sector of the cryptocurrency sector, including events, media and OTC trading, requesting AliPay, the most widely used fintech application in the country to block any transaction suspected of being linked to cryptocurrency exchanges.

However, on October 25, 2018, the Shenzhen International Arbitration Court officially he has declared that according to local regulations, cryptocurrencies like Bitcoin and Ethereum are considered property and as such, the possession or transfer of Bitcoin is not illegal in China.

"The Chinese court confirms that Bitcoin is protected by law.The International Arbitration Court of Shenzhen has established a case concerning the cryptos.Inside the verdict: the Chinese law does not forbid to own and transfer Bitcoin, which should be protected by law because of its nature of ownership and its economic value. "

The ruling by the International Court of Arbitration in Shenzhen essentially provided merchants the go-ahead to accept cryptocurrencies as a method of payment without conflicting with existing regulations.

In November, China's oldest technology publication, the Beijing Sci-Tech Report (BSTR), and several hotels and restaurants accept cryptocurrencies.

Starting in January, BSTR will officially sell the annual Bitcoin subscription at a fixed price of 0.01 BTC. However, the publication reaffirmed that the purpose of integration is to demonstrate the real potential and use the case of the blockchain, and that if the price of BTC increases substantially, the publication will reimburse buyers.

Thus, while cryptocurrency trading remains prohibited in China, technically, owning or transferring cryptocurrencies is not illegal. As such, it can be argued that China, to a certain extent, is not entirely scornful of encryption, given the government's optimism of blockchain technology as a central pillar of the fourth industrial revolution.

The Xiongan government, in charge of building the dream city of Chinese president Xi Jinping, the Xiongan New Area, has made blockchain technology a key component of the project, working with institutions linked to Ethereum, including ConsenSys, the largest software firm blockchain in the global sector, led by the co-creator of Ethereum Joseph Lubin, to develop blockchain-based tools for the government. Lubin said in July:

"As one of our first major projects in the People's Republic of China, we are delighted to help define the many" use cases "that could benefit from the trusted infrastructure of ethereum technology."

Taiwan may be the next cryptographic hub?

Singapore, Hong Kong, South Korea and Japan, mentioned the congress member of the four regions Jason Hsu, have already evolved into important markets.

On the upside, South Korea's second largest cryptocurrency exchange and Binance, the world's largest digital asset trading platform, according to the Blockchain Transparency Institute, have already established offices in Singapore and have entered beta tests of their trading with guaranteed bank partners.

Japan and South Korea, as two of the largest cryptocurrency markets, have shown significant progress in terms of regulation and growth in the sector.

To compete against the four markets, Taiwan should establish a strong selling point to attract cryptocurrency trade and blockchain activities.

South Korea's FSC recently said that banks are free to work with cryptographic exchanges and the Seoul Central District Court established a case between the local exchange of cryptocurrencies Coinis and the main commercial bank Nonghyup, in favor of Coinis, setting a precedent for the industry.

The lawyer Kim Tae-rim, who represented Coinis, said that the case is a cornerstone for the cryptocurrency sector as it would encourage banks to refrain from unfair trading of digital goods.

"The cryptocurrency trade, by default, has the right to deposit and withdraw funds freely to and from the major banks of South Korea and a sudden interruption of the partnership and services by the bank [in this case Nonghyup] without sufficient evidence or reasoning falls within the violation of the contract. "

So far, Taiwan has not driven sufficient initiatives to attract into some of the largest cryptocurrency and blockchain companies from other major markets. But, if Hsu and the coalition continue to lead the adoption of the crypto in Taiwan, in the medium term, companies enter the market as stable banking services and government support are guaranteed.

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