Author: FinTax
1. Introduction
On October 15, 2025, Chinese pop superstar Jay Chou posted two updates on Instagram calling out well-known Taiwanese magician Tsai Wei-Tse, angrily accusing him of going missing and stating, "If you don't show up soon, you're done for," before unfollowing him, which sparked trending discussions. According to public reports, Jay Chou had entrusted Tsai with 100 million New Taiwan Dollars (approximately 23 million RMB) a few years ago to purchase and manage Bitcoin, but now this friend has gone missing, and the assets are unaccounted for. Both protagonists in this incident are Taiwanese and are subject to the "tax laws" of Taiwan. Jay Chou's act of entrusting his friend to hold Bitcoin is unrelated to tax evasion; it is likely due to the former's lack of expertise in the cryptocurrency field, leading him to trust the latter.
The act of entrustment involved in this incident, where the principal entrusts their assets to a custodian for management, is particularly common in the field of cryptocurrency investment. Such arrangements often bring systemic tax and regulatory risks to the parties involved due to complex entities and diverse tax types. This article uses Jay Chou's entrusted cryptocurrency asset incident as a case study, focusing on Taiwan's cryptocurrency tax policies and the latest developments, providing a panoramic interpretation of the custodial behavior of cryptocurrency assets in Taiwan for investors.
2. Overview of Cryptocurrency Tax Policies and Latest Developments in Taiwan
2.1 Overview of Taiwan's Cryptocurrency Tax System
Currently, while Taiwan has established a preliminary framework for cryptocurrency taxation, it remains somewhat vague. On one hand, the classification of cryptocurrency in Taiwan has not been clearly defined through specific legislation: according to the Financial Supervisory Commission (FSC) of Taiwan's order No. 1080321164 issued in 2019 and a joint statement released by the FSC and the Central Bank of Taiwan on December 30, 2024, Taiwan considers virtual currencies like Bitcoin not to be money, lacking legal tender status, and their value is unstable, categorizing them as highly speculative virtual goods. In terms of classification, it distinguishes between cryptocurrencies with securities attributes and ordinary cryptocurrencies. On the other hand, Taiwan lacks specific tax regulations for cryptocurrencies, primarily relying on the extension of existing tax laws. Unlike the United States and Germany, which tax cryptocurrency gains as capital gains, individuals and businesses in Taiwan must pay income tax on cryptocurrency trading profits, similar to how India and Japan classify cryptocurrency income as ordinary income subject to income tax.
2.2 Overview of Cryptocurrency Regulation in Taiwan
Taiwan's regulatory policies regarding cryptocurrencies are not static; in recent years, with the expansion of the cryptocurrency market and global regulatory trends, Taiwanese authorities have gradually aligned their regulatory policies and measures with international standards while seeking innovation. Starting in 2021, the FSC and Taiwan's financial authorities have released a series of guidelines, marking a transition from "no regulation" to "limited regulation." In 2021, the FSC included virtual currency platforms under anti-money laundering regulations, requiring platforms to implement transaction monitoring and reporting obligations. Although this measure did not directly involve taxation, it laid the groundwork for subsequent tax audits. In 2022, Taiwan's financial authorities mentioned in their annual tax planning that they would strengthen the review of cryptocurrency trading by high-net-worth individuals, focusing on combating tax evasion. In September 2023, the FSC released the "Guidelines for the Management of Virtual Asset Platforms and Trading Businesses (VASP Guidelines)" as a reference for compliance in business operations. The VASP Guidelines regulate the business activities of VASP practitioners based on anti-money laundering laws.
From 2024 to 2025, the FSC and Taiwan's financial authorities made further substantial progress in researching and establishing cryptocurrency tax policies. In 2024, the FSC announced that the "Virtual Asset Service Act" would be submitted to the Legislative Council in June 2025 to complete the legislative process, and the drafting of this law is currently underway. On January 13, 2025, Taiwan's financial authorities submitted a written report to the Legislative Yuan's Finance Committee regarding the "Taxation Regulations for Cryptocurrency Income," clarifying the taxation framework for cryptocurrencies in Taiwan. In July, the Legislative Yuan's Legal Affairs Bureau released a special research report on cryptocurrencies—"Research Report on Tax Regulations for Cryptocurrencies from Legal, Policy, and Global Practice Perspectives," which pointed out that while Taiwan has shifted from a wait-and-see approach to substantively including cryptocurrencies in the tax category, it still lacks clear legislative norms and enforcement details, recommending that Taiwan's financial authorities draft a dedicated chapter on virtual asset taxation or establish specific laws.
Overall, recent policy dynamics indicate that Taiwan's cryptocurrency tax policies are trending towards normalization and standardization, both at the legislative and policy execution levels, aiming to provide a fairer and more transparent market environment for the local cryptocurrency industry.
3. Analysis of Tax and Regulatory Risks of Custodial Behavior of Cryptocurrency Assets in Taiwan
Returning to this incident, the Bitcoin custodial dispute between Jay Chou and his friend appears to be a simple civil contract dispute, but it profoundly reveals the identification dilemmas and compliance risks that cryptocurrency faces under traditional tax law frameworks. Under Taiwan's current tax law system, such custodial arrangements may not only trigger multiple tax burdens, such as comprehensive income tax and gift tax, but also face the risk of being scrutinized by tax authorities due to the application of the "substance over form" principle. As the FSC promotes the legislation of the "Virtual Asset Service Act," the transparency requirements for cryptocurrency transactions will significantly increase, and traditional asset holding methods like custodianship will face unprecedented tax challenges. To specifically discuss the tax and regulatory risks involved in custodial behavior, it is essential to start from the current legal provisions in Taiwan regarding the identification of tax types, tax amount calculation, and related regulatory issues.
3.1 Involved Tax Types and Legal Basis
3.1.1 Comprehensive Income Tax
According to the written report on the "Taxation Regulations for Cryptocurrency Income" (Taiwan Financial Tax Document No. 11304672340), for non-securities virtual currencies (such as Bitcoin and Ethereum), their trading income is classified as "property transaction income." Therefore, regardless of how Jay Chou's funds flow back, at the stage of selling Bitcoin to realize profits, income tax will inevitably be triggered, which is the heaviest and most certain tax burden in the entire transaction. According to Article 14, Item 1, Category 7 of Taiwan's Income Tax Act, the formula for calculating the comprehensive income tax arising from custodial behavior is: Taxable Income = Total Sale Revenue - Original Acquisition Cost - Necessary Expenses. For a substantial income of nearly 200 million, the highest tax rate of 40% will almost certainly apply, resulting in Tax Payable = Taxable Income × 40%. From the perspective of tax liability, if the custodian acts as the nominal holder but the actual beneficiary is the principal, the tax liability may fall on the principal. However, if the custodian disposes of the assets without authorization, it may lead to ambiguous tax responsibilities.
3.1.2 Gift Tax
Custodial behavior may involve the transfer of funds, and in the absence of sufficient evidence to prove it as a "trust investment" relationship, the transfer of funds may be presumed by tax authorities as a "gratuitous gift." According to Article 4, Item 2 of Taiwan's Estate and Gift Tax Act: "A gift, as defined in this Act, refers to the act of a property owner giving their property to another without compensation, which takes effect upon acceptance by the other party." If rigorous custodial agreements, documentation of fund transfers, and other documents cannot be provided, tax authorities have the right to determine based on substantive economic facts that the "principal" has gifted the funds to the "custodian," thus imposing gift tax. Specifically, for calculation, according to Article 19 of the Act: "Gift tax is levied on the total amount of gifts made by the donor in a year, minus the deductions specified in Article 21 and the exemptions specified in Article 22, resulting in the taxable net amount of the gift," applying a progressive tax rate of 10% to 20%. Since the asset amount in this case clearly exceeds 50 million, a 20% progressive tax rate should apply. The calculation formula is: Tax Payable = (Total Gift Amount - Exemption of 2.2 million - Deductions) × 20%.
3.2 Tax and Legal Risks of Custodial Behavior
In recent years, Taiwan has gradually shifted from temporary guidelines to dedicated legislation regarding cryptocurrency tax policies, with the Legislative Yuan clearly recommending the establishment of a dedicated tax law to address many ambiguities in the current framework, such as loss offsetting, whether unrealized gains are taxable, and cost recognition disputes. In execution, there is also a gradual push to enhance information transparency and tax source management. This is particularly evident in the "Virtual Asset Service Act" that the FSC is promoting, which aims to establish a platform registration system and strengthen information reporting mechanisms, significantly enhancing the tax authorities' ability to obtain transaction data, indicating that compliance pressure will increase substantially in the future. This suggests that investors should closely monitor announcements from the FSC and Taiwan's financial authorities and adjust their strategies in a timely manner. For example, if a platform reporting system is implemented in the future, custodial behavior may be more easily scrutinized.
Additionally, custodial behavior of cryptocurrency assets in Taiwan involves complex tax and regulatory issues, which may not only impose additional tax burdens on investors but also lead to asset losses. Since Article 7 of Taiwan's Taxpayer Rights Protection Act clearly states that the taxpayer is the actual recipient of income, this reflects the principle of substance over form. In a custodial relationship, although the assets are registered in the custodian's name, if the actual investment, income attribution, and disposal rights belong to the principal, tax authorities may recognize the principal as the substantive rights holder and require them to fulfill tax obligations. In Jay Chou's case, if the custodial relationship cannot be proven, tax authorities may tax the custodian, leading to asset losses for the principal. If custodial behavior is indeed necessary, investors need to proactively declare cryptocurrency gains as required, retain complete transaction records, and sign written agreements in custodial arrangements to clarify the rights and obligations of both parties and tax responsibilities.
4. Conclusion
Jay Chou's case is by no means an isolated incident; it serves as a mirror reflecting the risks of custodial behavior of cryptocurrency assets, revealing the systemic risks faced by such behavior under Taiwan's legal and tax frameworks. The world of cryptocurrency values decentralization and anonymity, but the centralized responsibility for tax compliance remains firmly anchored on each investor. In the face of risks, superstars and ordinary cryptocurrency investors are no different; how to control potential tax and legal risks is a topic worthy of long-term attention.
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