Are virtual currencies and stablecoins in Taiwan taxable? Finance Minister: We'll wait for the Financial Supervisory Commission's classification before commenting.

The controversy over whether virtual currencies and stablecoins in Taiwan should be taxed resurfaced at the Legislative Yuan on December 17. Minister of Finance Chuang Cuiyun responded to legislator Lai Shih-bao’s inquiry, stating that the Financial Supervisory Commission’s regulations related to virtual assets are currently under review. We must wait for the relevant laws to be enacted to determine whether virtual currencies are classified as payment tools or securities, which will then inform the appropriate taxation method. Lai Shih-bao pointed out that virtual currency trading volume is substantial, and the Ministry of Finance should actively consider taxation.

Finance Minister Reveals Taxation Dilemma: Classification First or Taxation First

The core dilemma regarding whether virtual currencies and stablecoins in Taiwan should be taxed lies in the sequence of regulatory classification and tax system design. Minister Chuang’s statement clearly exposes this dilemma: the Ministry of Finance wants to impose taxes but is unsure of the standards to apply. If virtual currencies are classified by the Financial Supervisory Commission as “payment tools,” they might be taxed similarly to electronic payments, such as business tax or transaction tax. If classified as “securities,” they could be taxed like stocks, including securities transaction tax and capital gains tax. If classified as “commodities,” they might be taxed like gold and other precious metals, such as property transaction gains tax.

This “waiting for the Financial Supervisory Commission’s classification” stance is essentially a delaying tactic by the Ministry of Finance. Most countries and regions worldwide do not wait for perfect regulatory classification before taxing virtual currencies. The US IRS has regarded cryptocurrencies as property for taxation since 2014, Japan classified them as miscellaneous income in 2017, and South Korea began imposing a 20% capital gains tax starting in 2025. Taiwan’s hesitation may stem from concerns over voter support within the crypto industry and industry development.

Legislator Lai Shih-bao’s pressure highlights a reality: virtual currency trading volume is large, and the Ministry of Finance should actively consider taxation. Industry estimates suggest Taiwan’s annual crypto trading volume could reach trillions of New Taiwan Dollars. At a 0.1% transaction tax rate, annual revenue could amount to billions of NTD. Under increasing fiscal pressure, this represents a significant revenue source not to be overlooked.

Chuang Cuiyun responded that “the Ministry of Finance is indeed reviewing taxation,” but did not provide a specific timeline. This vague statement indicates internal disagreements within the Ministry of Finance regarding the taxation model. Should it be taxed based on transaction volume (similar to securities transaction tax)? Or on profits (similar to property transaction gains tax)? Should it adopt a real-name reporting system or a source withholding system? These technical details require time to deliberate.

Central Bank Reveals Five Major Risks of Stablecoins and Concerns Over Monetary Sovereignty

(Source: Taiwan Central Bank)

On December 18, Taiwan’s Central Bank released a document offering a deeper analytical perspective than the Ministry of Finance. The Central Bank discussed six key issues, revealing systemic risks of stablecoins and potential threats to Taiwan’s financial stability.

Five Major Risks of Stablecoins Revealed by the Central Bank

Price Decoupling Risk: Even if the backing assets are safe assets like government bonds, market pressure could lead to sell-offs, causing stablecoin prices to decouple from their peg.

Bank Run Risk: Due to insufficient transparency of reserve assets, misappropriation, or price volatility, market confidence in stablecoins could be shaken, triggering holders to withdraw en masse.

Contagion Risk: Risks in the crypto asset sector could spread not only among issuers and service providers but also to traditional financial systems.

Exchange Rate Fluctuation Risk: Stablecoins pegged to foreign currencies may present arbitrage opportunities, leading to large-scale capital movements and increased exchange rate volatility.

Impact on Banking Intermediation: Capital flowing out of bank deposits into stablecoins could form a shadow banking system, threatening the role of banks as financial intermediaries.

The Central Bank’s concerns about US dollar stablecoins are particularly prominent. The document states that US dollar stablecoins might circumvent Taiwan’s current foreign exchange regulations, weaken cross-border capital flow monitoring, and impact the stability of the New Taiwan Dollar exchange rate. This concern is not unfounded, as the usage of USDT and USDC in Taiwan continues to grow, with many conducting cross-border remittances via stablecoins to evade foreign exchange reporting requirements.

However, the Central Bank also considers Taiwan relatively safe. The document notes: “In economies with cost-efficient payment systems, stable prices, and good creditworthiness (such as Taiwan), the public has high trust in the New Taiwan Dollar, making it less susceptible to ‘dollarization’ risks driven by the widespread adoption of US dollar stablecoins.” This confidence stems from Taiwan’s sound financial system and the stability of the New Taiwan Dollar. In contrast, emerging markets with weaker economic and financial fundamentals are more vulnerable to threats to their monetary sovereignty.

New Taiwan Dollar Stablecoins vs US Dollar Stablecoins: Regulatory Divergence

The Central Bank’s document reveals a starkly different attitude toward the two types of stablecoins. Regarding New Taiwan Dollar stablecoins, the Central Bank believes “their impact on monetary credit creation and monetary policy transmission is minimal; however, the future impact depends on their application scenarios and regulatory framework design.” This relatively tolerant stance indicates that the Central Bank does not oppose the development of New Taiwan Dollar stablecoins and may even see them as tools for the internationalization of digital New Taiwan Dollars.

For US dollar stablecoins, the Central Bank explicitly expresses concern. The document states that US dollar stablecoins could bypass current foreign exchange regulations, weaken cross-border capital flow monitoring, and affect the stability of the New Taiwan Dollar exchange rate. The Central Bank plans to “follow IMF and other international organizations’ guidance, revise stablecoin-related statistics in a timely manner, and strengthen real-time monitoring and improve foreign exchange management.” This wording suggests that stricter regulation of US dollar stablecoins may be forthcoming, including requiring exchanges to report large transfers, limiting individual holdings, or mandating foreign exchange declarations when converting stablecoins to New Taiwan Dollars.

The answer to whether virtual currencies and stablecoins in Taiwan should be taxed remains “to be determined.” The Ministry of Finance and other regulators are classifying them, international regulatory frameworks are maturing, and the Central Bank is assessing risks and formulating responses. This multi-agency approach means a clear taxation plan may still take 6-12 months to implement. For Taiwanese crypto investors, the current regulatory vacuum offers relative freedom but also the risk of future retrospective taxation. It is advisable to keep comprehensive transaction records for future tax reporting needs.