Taiwan’s financial regulator permits professional investors to invest in digital asset ETFs

• The FSC has restricted access to the virtual asset ETFs to professional institutional investors
• Security companies will need to establish a “virtual asset ETF suitability system”

Taiwan’s financial regulator is allowing professional investors to invest in “foreign virtual asset” exchange-traded funds (ETFs) through a re-entrustment service.

In an announcement, the Financial Supervisory Commission (FSC) explained that the move would give investors a “variety of product choices and enhance the momentum of China’s securities firms’ re-entrustment of business.”

As a result of the high risks involved in crypto-related ETFs, the FSC has restricted this to professional investors. These include professional institutional investors, high-net-worth professionals, and high-asset clients.

Additionally, the FSC noted that security companies will need to establish a “virtual asset ETF suitability system, which needs to be approved by the board of directors, to determine a client’s professional knowledge of virtual assets before investing in an ETF.

The security companies will also need to provide product information relating to the ETF before a client makes their first purchase. The security firms will also provide regular training and education on virtual assets.

The FSC said it will “continue to pay attention to the handlings of re-entrusted business by securities firms and continue to improve relevant regulations to ensure the rights and interests of investors and enhance the competitiveness of securities firms.”

Cautious approach

Taiwan has, traditionally, taken a cautious stance toward the cryptocurrency market.

However, over the past year, the financial regulator has seen a shift toward the industry. Last September, the FSC released its guidelines for crypto exchanges with the aim of boosting crypto regulation.

Following that, last October, the Taiwan government introduced the Virtual Asset Management Bill.

Focusing on customer protection, regulatory obligations, and industry self-regulation, the bill provides guidelines for virtual asset service providers (VASPs) while building industry growth.