February 2026 Newsletter
Virtual Asset Act Review Completed, FIs Prepare
Taiwan’s Virtual Asset Service Act draft has cleared Executive Yuan review and will be sent to the Legislature soon. As stablecoins become popular in cross-border trade, banks are expected to first provide custody services, then integrate them with fiat payments. All virtual asset providers must obtain approval and meet strict custody, asset segregation, and cybersecurity rules. [1]
LYODS INSIGHTS: Banks and VASPs in Taiwan will soon have to handle stablecoins like real money. They’ll need clear visibility on who’s paying whom, where funds come from, and how crypto links to fiat. Lyods will helps organziation stay compliant without reinventing their AML systems.
US Shutdown Halts SEC Crypto Oversight
A partial U.S. government shutdown has forced the Securities and Exchange Commission (SEC) to scale back operations, halting routine crypto exemptions, ETF reviews, and stablecoin regulation efforts. This regulatory “freeze” has stalled innovation in the crypto sector and increased market uncertainty, contributing to price declines in Bitcoin and Ethereum. Projects awaiting approvals are left in limbo as staff focus only on emergency work, heightening volatility and investor concern. [2]
LYODS INSIGHTS: SEC shutdowns heighten AML and compliance risks for crypto and stablecoins. Our AML solution supports continuous risk monitoring, automated suspicious activity detection, and audit-ready reporting. With adaptive workflows and stablecoin-specific controls, firms stay compliant even during regulatory uncertainty.
HKMA to Launch First Stablecoin Licenses
Hong Kong’s HKMA plans to issue its first stablecoin issuer licenses in March, launching its new regulatory framework. Only a few applicants will be approved initially, focusing on strong risk management, AML/CFT controls, and solid reserve backing. Licensed issuers must follow overseas rules for cross-border business, with potential mutual recognition planned. [3]
LYODS INSIGHTS: The new regime creates regulated clients requiring ML/TF risk assessments, transaction monitoring, sanctions screening, and suspicious activity reporting under HKMA rules. Issuers will need specialised tools for cross-border flows, unhosted wallet risks, and reserve transparency. Early compliance partners may gain strategic advantage as Hong Kong develops into a stablecoin hub.
Japan Establishes New Crypto Oversight Unit
Japan is reinforcing its position as a global Web3 hub. On January 26, 2026, the Financial Services Agency (FSA) announced the establishment of the “Crypto Assets and Stablecoins Division.” This dedicated unit, expected to launch in April 2026, centralizes the oversight of digital assets under the newly restructured “Asset Management and Insurance Bureau.”
This reorganization follows the 2023 legalizing of stablecoins and coincides with the 2026 tax reform, which shifts crypto taxation to a 20% separate tax rate. By upgrading its internal structure, the FSA aims to provide clearer regulatory guidance, enhance investor protection, and accelerate the integration of blockchain technology into Japan’s traditional financial ecosystem. [4]
LYODS INSIGHTS: Japan is shifting from simply regulating crypto to building it into its financial system. The new FSA division supports the national asset management strategy and makes it easier for banks and companies to enter Web3. This is expected to accelerate yen stablecoins, corporate crypto adoption, and position Japan as a stable global hub for digital asset operations.
Japan Plans Crypto Shift Under FIEA
On February 3, 2026, Japan’s Financial System Council officially approved a proposal to transition the regulatory framework for crypto-assets from the Payment Services Act to the Financial Instruments and Exchange Act (FIEA). This shift introduces stringent insider trading regulations and enhanced disclosure requirements. With domestic crypto accounts exceeding 12 million and deposited assets surpassing 5 trillion yen, authorities determined that a robust investor protection framework, similar to that of traditional securities, is essential. The Financial Services Agency plans to submit the amendment to the Diet during the 2026 special session, aiming for enforcement by January 2028. This timeline provides the industry with a two-year grace period to align with the new compliance standards. [5]
LYODS INSIGHTS: Japan’s integration of crypto into the FIEA signals full institutional adoption of digital assets. While stricter compliance may pressure smaller players, it strengthens infrastructure for institutional capital and future crypto ETFs. Together with the 20% tax reform, Japan is positioning itself as a transparent and regulated global digital finance hub, where security and compliance become key competitive drivers.
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