Taiwan's financial field is known for its conservative outlook and rich foreign exchange reserves: fifth in the world at €XNUMX billion for a country of twenty-four million people.
Thanks to its conservative outlook and rigorous regulatory environment, Taiwan is not considered a regional financial center like its neighbors Hong Kong and Singapore. Taiwan is best known for its manufacturing tech giants, such as the Taiwan Semiconductor Manufacturing Company (TSMC).
The government wants to change this perception.
A pillar of Taiwan President Tsai Ing-wen's XNUMX election campaign was the "New South-Facing Policy" aimed at promoting the diversification of China's exports to Southeast Asia and the expansion of other areas of the economy, such as financial services.
This is where XREX, a Taipei-based TradeTech fintech that closed a €17 million round in August, wants to step in.
Given Taiwan's strong US dollar holdings and the lack of US dollars in many South East Asian countries such as India, XREX wants to build cross-country bridges for commercial remittances, with the backend powered by stablecoins like USDC, DAI, and USDT. .
“Taiwan is not known globally for exporting its financial field, but Taiwan is known for its strong domestic banking field,” Wayne Huang, director and co-founder of XREX, told CoinDesk in an interview. "So far, the banking industry has not been able to export the field to emerging markets and we want to change that."
XREX investors include Taiwan's National Development Fund (NDF), a sovereign wealth fund that allocates capital to technological innovation and economic diversification.
“The government feels that there has not been enough care in exporting financial services,” Huang said, noting that fintech and companies integrating blockchain technology are focus areas for the NDF.
One of XREX's first target markets is India, which exercises capital controls on the amount of outgoing remittances that a person or entity can send per year, which produces a shortage of US dollars in the country and headaches for companies that try to pay distributors abroad.
India has a huge diaspora in Canada, where XREX recently secured a money services business license from Canada's Financial Transactions and Reporting Analysis Centre, or FinTrac, the country's national financial intelligence agency.
“There has been great regulatory clarity from Canadian regulators. They explained everything very clearly and we know precisely what is expected of us,” said Huang. He claimed that XREX uses the CipherTrace cryptoforensic suite to strengthen its anti-money laundering (AML) efforts.
Taiwan's Regulatory Chasm
But such regulatory clarity does not exist in Taiwan, Huang told CoinDesk. The company has registered and had some initial talks with Taiwan's financial regulator, the Financial Supervision Commission, and Huang said the regulator has not shown much interest.
In fact, XREX builds financial channels between countries, without touching the Taiwanese banking system or using Taiwanese currency. The capital between Canada and also India, for example, would be fed in local currency to the respective countries and then sent between them in the form of stable currencies. Most of the company's service customers are non-Taiwanese and it does not offer services in China.
Taiwan's hands-off approach to non-Taiwanese monetary activity in its banking system may have been why stablecoin transmitter Tether was established for many years already before it was shut down by its correspondent banking partners. in XNUMX (Tether unsuccessfully sued Wells Fargo, its former partner, to restore access and provide an explanation). Huang stated that XREX's US dollar associates have already audited the operation and are happy with it.
“I am optimistic that in a few years there will be crypto-specific licenses in Taiwan. We want to ask for these licenses and we want regulators to become familiar with XREX. We are waiting for the government to make some kind of license available to us so that we can apply for it,” Huang said.
Until there is a free Taiwanese license, Huang told CoinDesk, XREX plans to continue applying for other licenses around the world as it expands its business. The next step is Singapore, where XREX is applying for an Essential Payment Corporation License, which would allow it to transfer money and offer digital payment token services to Singapore residents.
"We want to be a regulated entity," he said.