Taiwan’s Financial Supervisory Commission (FSC) has unveiled plans to allow banks to issue stablecoins as part of a comprehensive regulatory framework for virtual asset service providers (VASPs).

The draft bill, expected in June, aims to establish stablecoins as a bridge between the New Taiwan dollar (TWD) and digital currencies, according to local media reports.

The move is part of Taiwan’s sustained effort to integrate digital assets within the traditional banking system.

Dual benefits

FSC Chairperson Kung Chin-lung highlighted the significance of stablecoins in fostering seamless virtual asset transactions. These digital assets, typically pegged to fiat currencies like the US dollar or TWD, are designed to provide stability in a highly volatile market.

The regulator further stated that stablecoins will allow investors a safe entry point into Taiwan’s burgeoning digital asset market.

Stablecoins offer dual benefits: safeguarding against market volatility and enabling fast, low-cost cross-border transactions. Investors often use stablecoins to convert volatile cryptocurrencies into more stable assets or as a temporary measure before re-entering the market.

Banking Bureau Director Chuang Hsiu-yuan noted that existing stablecoins operate without regulatory oversight and rely on issuers’ claims of fiat reserve backing. Under the proposed regulations, all stablecoins issued in Taiwan would need FSC approval, and issuers and reserve managers would be subject to strict requirements.

Delineating stablecoins from CBDCs

The FSC emphasized that stablecoin development would involve close coordination with Taiwan’s central bank to address issues related to monetary policy and financial stability.

Stablecoins, which are privately issued and tied to fiat currencies, differ from central bank digital currencies (CBDCs), which are state-backed digital versions of legal tender. To avoid confusion, the FSC plans to clearly delineate the roles of stablecoins and CBDCs in its regulatory framework.

Taiwan’s decision aligns with international efforts to regulate stablecoins and ensure their integration into financial systems. While their primary function is within digital ecosystems, stablecoins are increasingly viewed as a tool for mainstream financial innovation.

The post Taiwan’s FSC outlines regulatory path for bank-issued stablecoins appeared first on CryptoSlate.