Taiwan’s Financial Supervisory Commission (FSC) will take on the main responsibility for regulating cryptocurrency, FSC Chairman Huang Tian-mu told local media on Monday, as Taiwan moved closer to strengthening crypto regulation.

Huang said the FSC has received instructions from the cabinet to oversee crypto payment and transactions, but it will not supervise the trading of non-fungible tokens at the moment.

The FSC will focus on getting trading platforms to keep their crypto assets separate from those owned by their clients, while supervising the platforms’ product listings and their customer protection measures, according to Huang.

Huang added that the FSC will make a formal announcement soon. The regulator will also discuss the establishment of self-regulating guidelines with domestic crypto platforms.

In July 2021, the FSC introduced anti-money laundering rules for crypto service providers, but the industry remained largely unregulated. The FSC has also asked banks and credit card companies not to allow credit cards as a means of payment for virtual assets services.

Tseng Ming-chung, a Taiwanese lawmaker and a former chair of the FSC, told Forkast on Monday that a group of lawmakers met in January and submitted a request to the Executive Yuan – the cabinet – to name an acting central authority by May 16 to shape regulatory framework and a development roadmap for the crypto industry.

Tseng said he had called for the newly-established Ministry of Digital Affairs (MODA) to be appointed the central agency governing the crypto sector as it encourages digital innovation and “would focus more on development” while the FSC would likely be more inclined towards traditional financial supervision.

MODA would be a more ideal central governing agency to regulate all aspects of crypto assets, according to Tseng. MODA, which launched in August, has identified information security and Web 3.0 technology as its key focus areas to protect against Chinese cyberattacks amid escalating tensions between China and Taiwan.

“It’s unclear at this point how broad the FSC will take charge of,” Tseng said, adding that the regulators still need a clearer definition of virtual assets. 

Currently, the central bank and the FSC regard crypto assets as “highly speculative virtual commodities” rather than currencies, according to an April 2021 statement.

If the FSC only oversees crypto trading and transactions, “there won’t be much of a difference from what’s in place now,” he said.

Tseng added it would be easier to have just one unified authority to regulate crypto, rather than having multiple agencies overseeing various aspects of the sector.

“It’s just chaotic now. If regulators see crypto assets as commodities, then the FSC would be the go-to supervisor for anything related to securities. When it comes to money laundering, the Ministry of Justice would be a natural fit. As for fraud, the Ministry of Justice and the National Police Agency would be the expert,” Tseng said. 

“Crypto assets are often inter-connected, and it is hard to cut them [into different regulatory areas],” he added.

Taiwanese authorities have become more aware of crypto risks since the collapse of FTX crypto exchange. In a November bankruptcy document FTX submitted to an U.S. court, Taiwan accounted for roughly 3% of FTX’s global customer total.

Last month, Taiwan’s Ministry of Justice said that it is pondering regulations that would require government officials and employees to report their crypto asset holdings under local property declaration laws.

“Taiwan is following in the footsteps of Singapore and Hong Kong in taking a keener eye on the crypto sector,” Angela Ang, senior policy advisor at California-based blockchain intelligence firm TRM Labs and a former regulator at the Monetary Authority of Singapore, told Forkast.

“In today’s environment, regulation could be an opportunity to build trust and growth in Taiwan’s digital asset ecosystem if approached the right way,” Ang added. “The devil will be in the details.”