Taiwan Ventures into Asset Tokenization: A New Era for Real World Assets

The nation of Taiwan is making significant strides in the digitization of financial assets, known commonly as the process of tokenizing Real World Assets (RWA). On August 26, Taiwan’s Financial Supervisory Commission (FSC) announced its collaboration with 10 prominent financial institutions, alongside the Taiwan Depository & Clearing Corporation, Taiwan Stock Exchange, and the Central Bank. Their joint venture is the formation of an RWA tokenization unit, aimed at conducting Proof of Concept (POC) tests for both domestic and international bonds and funds. The initiative marks an exciting advance towards the creation of a single, comprehensive platform for RWA tokenization, a move designed to streamline asset digitization and pave the way for regulatory integration.

Web3 and RWA: A Confluence of Minds

In a testament to the importance of this transformation, Cathay Financial Holdings recently hosted a digital asset trends forum, assembling experts from various sectors. Notable attendees included Hu Zhehua, Director of the Financial Markets Development and Innovation Division at the FSC; Deputy Director Shi Yijun; and Information Officer Wu Jianxing of Cathay Financial. The forum was a hotbed of intellectual exchange, examining Taiwan’s advancements in melding Web3 technologies with RWA applications and unpacking the broader digital asset landscape.

The FSC’s Multi-Faceted Approach to Virtual Assets

Director Hu Zhehua provided insight into the FSC’s three-pronged strategy for virtual asset policy:

• The draft Virtual Asset Service Act, which outlines the definitions and management mechanisms for virtual assets and stablecoins, was submitted to the Executive Yuan in June.

• As of November 2023, a pilot program for virtual asset custody businesses has been initiated, involving four approved firms. The program will serve as a basis for practical regulatory adjustments, encompassing processes such as key creation and asset withdrawal.

• The POC tests spearheaded by the RWA tokenization unit focus on the transformation of bonds and funds, with interim reports expected by September. These findings will guide future regulatory frameworks and the development of a unified national platform.

Cathay Financial: A Pioneer in Asset Tokenization

Cathay Financial has emerged as a trailblazer in the digitization arena. By 2023, Cathay Securities achieved the milestone of being the first broker in Taiwan to issue a security token offering (STO). The company’s continued involvement in the RWA tokenization initiative and its partnerships with other brokerages underscore its commitment to transforming traditional bonds with blockchain technology. Furthermore, Cathay United Bank has been approved to participate in the virtual asset custody trial, fortifying its foothold in the burgeoning field.

Unlocking Digital Asset Potential

The forum also released the “Cathay Financial Digital Asset Trend Insight Report”, drawing on research from top universities such as National Chengchi University and Soochow University. According to the report, approximately one million Taiwanese households are now digital asset users, indicating that the market is still in its nascent stage with substantial growth potential on the horizon.

The FSC emphasizes that the current wave of POC testing is crucial for resolving technical and regulatory challenges, positioning Taiwan as a frontrunner in Web3 asset applications. As Taiwan progresses towards finalizing its virtual asset service laws and custody systems, the promise of a national RWA tokenization platform stands poised to emerge as a pillar of innovation within its financial technology landscape.