News

Credit Cards are Risky for Crypto Transactions, Says Taiwan’s Financial Watchdog

  • Richard Marley
  • July 25, 2022
  • 3 minutes read
  • 314
blog_image

Credit cards should not be used for crypto-related transactions, as stated by Taiwan’s financial regulator

The financial regulator of Taiwan has asked the local financial institutions to restrict the implementation of credit cards in payments for transactions that involve cryptocurrencies. The local media revealed the news. The authority stated that digital assets are highly risky when processed using a credit card as the cash flow is difficult to track.

The Taiwanese regulator, Financial Supervisory Commission (FSC) has urged the banks to not allow crypto-related payments with credit cards. It told the credit card issuers and banks that provide credit card services to effectively prevent the customers from using the cards to process their payments associated with cryptocurrencies and digital assets, as per a report from the business news portal UDN.

The watchdog listed the latest crypto market crashes and also the concerns of the people over the money laundering risks via virtual assets. It also mentioned the highly risky, speculative and volatile nature of digital currencies.

The sources from the financial industry state that the Financial Supervisory Commission (FSC) issued a call in a letter to the bankers association of Taiwan earlier this month. The authority of Taiwan did not deny the news and also did not comment on the words initially this week, but later the sources confirm the news to Forkast that the credit card agencies are advised to stop the registration process of crypto service providers as merchants.

The commission mandated that credit cards should only be used for consumer purchases and not for speculative trading or financial investments, and it allowed card issuers three months to adapt to the new regulations. The FSC also reminded consumers of a previous rule that prohibits using credit cards to pay for purchases connected to stocks, futures, and options.

Despite the passage of new anti-money laundering (AML) rules for service providers in the market this summer, Taiwan’s crypto industry is still mostly uncontrolled. The nation still has to complete a project to launch a digital currency issued by its central bank (CBDC).

The Taiwanese central bank processed and finalized a series of technical simulations in June. The simulations were performed in a closed-loop environment as a part of an ongoing trial for the prototype of the retail digital currency. However, the bank may require a couple of years to complete the remaining operation of the CBDC, admits the governor of the monetary authority.

Suggested Read: Taiwan  Bans Four Foreign Banks for Breaching FX Regulations