(Bloomberg) -- Taiwan is set to name its top financial regulator as the main authority overseeing crypto as it steps up control over the industry following the market turmoil triggered by the collapse of the FTX crypto empire.

The announcement of the Financial Supervisory Commission as the chief regulator of crypto exchanges and virtual assets could come as early as the end of this month, according a person familiar with the matter, asking not to be identified due to the private nature of the information. Taiwan’s cabinet and the FSC have been working with other government departments and talking to industry representatives to work out a concrete plan, said people with knowledge of the discussions.

If confirmed, the move would be the first time that Taiwan has officially appointed a regulator for the crypto industry and a shift from its relatively hands-off approach as authorities ramp up oversight amid a turbulent year. In contrast, its regional peers have taken a more active stance — Singapore has proposed tighter rules on retail crypto trading, while Hong Kong is powering ahead with enacting more industry-friendly rules to turn the city into a crypto hub. 

Taiwan’s Central News Agency reported on Sunday the possible announcement of the FSC as the crypto regulator by the end of March.

FSC Chairman Huang Tien-mu told reporters Monday at the legislature that the body will follow the cabinet’s instructions on the next steps, including the timing of any announcement. After the main crypto regulator and overall guidelines for regulations are announced, he added, the FSC will likely work with industry participants on “self-regulation measures.”

Huang said that the FSC will focus on regulating payment and trading-related virtual assets, and the cabinet will assign the rest to other government departments, adding that non-fungible tokens will not be under its supervision. He also said “it’s way too early” to discuss forming a separate legislation for virtual assets.

At the moment, the FSC only requires crypto platforms registered domestically to comply with its anti-money laundering requirements. There is not yet any legislation that directly applies to virtual assets. 

In response to the upcoming changes, crypto exchanges are trying to rally support from local companies for less onerous regulation. A joint paper sent from Binance Holdings, Matrixport Technologies and Woo Network LLC on Saturday called for more friendly regulation that provides “clarity” for players operating in Taiwan, according to a copy of the document seen by Bloomberg News. The companies hope to garner more local support before delivering the paper to officials, people familiar with the matter said.

“From our observations, some markets that tried to regulate virtual assets under existing financial rules and categorizations experienced great difficulty as the rules lacked clarity and made it very confusing for business operators, authorities and customers,” said the paper, which was written in Chinese. It suggests Taiwan reference regulatory frameworks in the EU and Dubai, where authorities set up independent and designated departments for virtual assets separate to traditional finance.

Tougher regulation could lead to financial losses for customers who are already participating in global market trading and further force crypto trading activities to go “underground,” hurting industry growth and regulatory progress, the paper added. 

The FSC’s Banking Bureau, which regulates traditional lenders, has been driving the regulatory changes and has held talks with crypto exchange operators, people familiar with the matter said. Exchanges that provide virtual asset trading services will be the first among the industry to be regulated under the FSC, the people added.

Other FSC bureaus could still be involved in the final regulatory decision given the complexity of virtual assets, the people also said. For example, virtual assets with the characteristics of marketable securities could be regulated by the Securities and Futures Bureau, NFT regulation could involve the cabinet’s Digital Affairs Ministry and stablecoins associated with fiat money could involve the central bank, they added. Discussions are still ongoing and plans could change. 

--With assistance from Chien-Hua Wan.

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