Spanner in the works for Taiwan’s bitcoin adoption

In spite of bitcoin’s positive attributes, and growth in popularity, the Taiwanese Financial Supervisory Commission (FSC) has stepped in to curb its adoption. “Bitcoin is not a currency,” stated the FSC, according to local PR service Central News Agency. “Financial institutions and the public shouldn’t use it as medium of payment. Given Bitcoin’s non-currency status, no bank deposits should be made with it, and banks are not allowed to receive or provide Bitcoins.”

The FSC was formed in July 2004, as an independent government agency. It’s purpose is to regulate the local securities markets, which include the Taiwan Stock Exchange, the Taiwan Futures Exchange, as well as the banking and insurance sector. In January, the FSC, blocked the advance of bitcoin adoption by preventing the rollout of Robocoin bitcoin ATMs.

“To install Bitcoin ATMs would require approval from FSC, which will not be given, so it is impossible for a Bitcoin ATM to come to or appear in Taiwan.”
— – FSC

While the Robocoin initiative may have failed, a competing company, Lamassu, made headlines by setting up one of its Bitcoin ATMs at Cosi o Cosi ice cream, in Taiwan’s capital Taipei. Due to its limited functionality, the FSCs oversight appears to have not applied, the Lamassu was considered a vending machine, not an ATM.

In Hong Kong, and merely a month later, over 25 investors lodged complaints about digital exchange MyCoin. The company had allegedly duped investors with lavish parties, gifts, and the promise of high returns. In August, Taiwanese authorities reported the arrest of two individuals, Lu Kuan-wei and Chen Yun-fei, in connection with the declared ponzi scheme.

The China Times news service reported that "Chen and Lu held several events for investors convincing each one to spend NT$1.62 million (US$49,600) for 90 BTC and an account with MyCoin’s parent company, which would distribute 0.63 of a bitcoin every day for a total value of NT$11,000 (US$337). The investors were told that their investment would be returned to them after just four and a half months."

MyCoin closed its doors, following an estimated US$387m in damages, and calls were made to completely ban bitcoin. "The government should not just stand aside," said Leung Yiu-chung,a Hong Kong based lawmaker.

"It’s simply not enough to just ask people to exercise caution when investing […] it has to ban the circulation of such virtual currency in the market."
— – Leung Yiu-chung

Spurring calls for regulation, there was a recent high-profile kidnapping, with a ransom demand for bitcoin. The Chairman of Pearl Oriental Oil, Wong Yuk-Kwan,was released after his Taiwanese kidnappers received US$1.68 million in bitcoin. The abduction of the 68 year old took place on Sept 20, he was kept in an abandoned house for 38 days in the Kouhu township, in western Taiwan. He was blindfolded, cuffed to a bed, and allegedly had burns and bruises on his face. Yuk-Kwan told South China Morning Post,  "I felt I might not be able to see the sun the next day."

The kidnappers, reported to be the criminal gang ”United Bamboo,” initially demanded a higher sum of US$10m in bitcoin. Fifteen Taiwanese people have been arrested so far, but according to Tsai I-hsueh, a detective in charge of the investigation, the group were only carrying out orders.The motive and “mastermind,” as I-hsueh describes the alleged leader, are still being investigated.

According to Taiwan News, following the release of Yul-Kwan, FSC Chairman Tseng Ming-chung declared bitcoin illegal.He stated that the FSC would work closely with the country’s central bank and police to uncover any illegal acts. He further said that the FSC will also be publishing a joint statement, with the central bank, to inform other countries of the regulations.

This news will come as a blow to Taiwan’s bitcoin advocates. Last month PayPal discontinued its Taiwanese services, and hopes were high that bitcoin would take its place.Thousands of convenience stores were already selling bitcoin over the counter, with the assistance of a digital wallet provided by BitoEX. The company has said that its BitoWallet had been growing in popularity.

According to recent documentation released by the exchange, further applications were also in development, as Taiwan’s government appeared to be supporting the FinTech industry, as well as blockchain innovation. Starting in September, all FamilyMart stores had the capacity to sell goods for bitcoin, by first transferring them into cash coupons.

The Taiwanese Fair Trade commission reported that convenience store visits totalled 2.9 billion in 2014, which provided an opportunity for companies such as BitoEX.

“Taiwan’s foreign travelers can buy as easily as locals. FamilyMart hopes to extend this ability to its online stores in the near future. At that point FamilyMart Taiwan will be able to accept cross-border payments from all over the world,”
— – BitoEX

Titan Cheng, CEO at BitoEX, explained that his company’s lab had been exploring the integration of blockchain technology and cross-currency settlement with BitoEX’s wallet applications since 2014. Cheng stated that cooperation with FamilyMart and other stores would mark,“the advent of a revolutionary innovation, since it is the first time the retail industry has successfully combined with the FinTech industry.”

It is yet to be seen whether the decision by the FSC will cause irreparable damage, or merely challenge such companies in the bitcoin industry.