Taiwan Banks Prepare for Digital Asset Custody Pilot as 2025 Applications Near

As Taiwan gears up for a major shift in its digital asset landscape, financial institutions are positioning themselves to play a pivotal role. On October 8, Taiwan’s Financial Supervisory Commission (FSC) revealed plans to launch a pilot program that aims to allow banks to offer digital asset custody services, a crucial step in the country's broader financial innovation push.

With the pilot expected to open for applications in early 2025, three banks have already shown interest in safeguarding cryptocurrencies for institutional clients. This initiative coincides with Taiwan's plans to roll out comprehensive digital asset legislation by the end of 2024, underscoring the government's commitment to fostering a secure and innovative financial environment.

Pioneering Institutional Crypto Custody

The FSC's program invites financial institutions, particularly banks, to step up as custodians for digital assets, including cryptocurrencies like Bitcoin and Ethereum. During a press conference, Hu Zehua, Director of the FSC's Comprehensive Planning Department, outlined the process for interested institutions. A 15-day public consultation will allow stakeholders to voice their opinions, with final program details to follow.

So far, banks have emerged as the primary candidates for the pilot, largely due to their robust capital reserves and existing security protocols. Though some securities firms have expressed interest, their smaller financial backing raises concerns about their ability to handle large sums of digital assets securely. In contrast, banks are seen as better equipped to manage the risks associated with this emerging market.

Prioritizing Security and Compliance

Security will be a cornerstone of Taiwan’s digital asset custody program. The FSC is placing significant emphasis on ensuring that financial institutions implement stringent safeguards to protect against theft, hacking, and fraud. Anti-money laundering (AML) measures will also be strictly enforced to prevent illicit funds from entering the system, safeguarding both clients and the wider financial market.

Institutions that join the pilot will need to specify which virtual assets they plan to manage and their target clientele, ranging from professional investors to virtual asset platforms. Retail clients are unlikely to be served in the initial phases, as banks will focus first on institutional clients to establish a secure foundation.

A Forward-Looking Move

Taiwan's upcoming digital asset custody pilot reflects the country’s strategic focus on balancing financial innovation with security. The initiative not only opens new doors for banks but also strengthens Taiwan’s position in the evolving global digital asset market. With comprehensive legislation on the horizon and financial institutions eager to participate, Taiwan is set to become a key player in the secure custody of cryptocurrencies.