Taiwan is preparing to enter the stablecoin market, with a projected launch in the second half of 2026. This initiative marks a significant advancement in the nation’s financial technology sector, potentially transforming its strategies for digital payments and international transactions. A key question remains: which currency will back Taiwan’s initial venture into stablecoins?
While the Financial Supervisory Commission (FSC) is still considering the specifics, the introduction of a regulated stablecoin is intended to modernize Taiwan’s financial infrastructure. FSC Chair Peng Jin-long has suggested that financial institutions will likely spearhead the initial issuance, setting a measured and careful approach for the project.
The decision to peg the stablecoin to either the New Taiwan dollar (TWD) or the U.S. dollar (USD) has considerable implications. This choice will define the stablecoin’s purpose, determining whether it serves as a domestic payment solution or a tool for broader international application.
A TWD-backed stablecoin could simplify local transactions and encourage innovation within Taiwan’s financial ecosystem. However, it would immediately face a major obstacle: Taiwan’s strict capital controls and the longstanding ban on exporting the local currency offshore.
Navigating Offshore Restrictions
For decades, the central bank has carefully prevented the unauthorized offshore circulation of the TWD. These measures aim to maintain control over the currency’s value and prevent the development of unofficial offshore pricing.
On the other hand, a USD-pegged stablecoin would bypass these restrictions. It would also provide greater flexibility for international settlements and potentially attract a wider user base. The tradeoff, however, could be a diminished focus on domestic applications.
Regulators are currently developing a framework that emphasizes full reserve backing, strict segregation of assets, and domestic custody requirements. These measures are designed to ensure the stability and security of the stablecoin, reducing risks related to volatility and fraud.
This cautious strategy reflects a broader trend among regulators globally as they navigate the complexities of digital assets. The FSC is clearly prioritizing consumer protection and financial stability.
The launch of Taiwan’s first regulated stablecoin, regardless of its currency peg, represents a pivotal moment. It could be a low-risk payments tool within Taiwan or a more ambitious challenge to the island’s established currency framework. The decision lies with Taiwan, and the world will be watching.
