Woofun AI reports that Taiwan has enacted foundational crypto legislation effective no earlier than early 2027, fundamentally altering the operational landscape for USDT and USDC by shifting from a registration model to a strict licensing framework. This regulatory pivot categorizes Virtual Asset Service Providers into seven distinct types, including exchanges, custodians, and lending platforms, each mandating separate authorization before operation. The core structural change eliminates the previous simple registration system, replacing it with a rigorous licensing regime that significantly tightens oversight on stablecoin circulation. A critical distinction is drawn between stablecoins pegged to the Taiwan dollar and those issued overseas, with only domestic issuers enjoying institutional legitimacy. To qualify, issuers must secure dual approval from the Taiwan Central Bank and the Financial Supervision Commission (FSC), ensuring that reserve assets are held 100% in secure instruments like government bonds and Taiwan dollars. These reserves must be managed separately through trusts, with a strict prohibition on interest payments to holders. Since only banks can generally satisfy these stringent conditions, the resulting architecture adopts a conservative "bank-centered" approach that prioritizes stability over innovation.

Meanwhile, offshore giants like USDT and USDC are reclassified as "regulated commodities" rather than currencies or payment tools. They are defined strictly as tradable regulated assets that can only circulate after being listed on legal Taiwanese exchanges and receiving explicit FSC approval. This framework does not ban their use but strictly controls their circulation pathways, effectively enabling asset functions while restricting currency functions. Holding and trading remain permissible, yet their integration into Taiwan's dollar payment system for settlement purposes is completely blocked. This strategy addresses three underlying policy considerations: safeguarding monetary sovereignty by refusing to recognize dollar-pegged stablecoins as domestic payment methods, separating private dollarization from the national payment system, and isolating them from critical payment infrastructure.

Furthermore, this approach strengthens investor protection and anti-money laundering measures, as regulators can more easily oversee listings, track transactions, remove unauthorized tokens, and verify customer identities when circulation is confined to licensed exchanges.

Woofun AI data shows that this regulatory divergence is part of a broader trend across Asia where countries are systematically classifying USDT and USDC as offshore dollar assets rather than domestic currencies, bringing them under regulated circulation frameworks. Comparing major Asian jurisdictions reveals four distinct regulatory models. China takes a largely complete ban on USDT and USDC, viewing dollar-denominated assets circulating outside its RMB payment network as a systemic threat to monetary sovereignty and foreign exchange stability. India suppresses trading incentives through a punitive 30% tax rate and a 1% tax deduction at source (TDS), effectively discouraging usage without an outright ban. Most other Asian countries adopt a "Licensed Circulation Restriction" model, defining USDT and USDC as assets rather than currencies, allowing holding and trading on licensed exchanges or in specific areas while preventing them from entering merchant payment and domestic settlement networks. In contrast, a "Formal Integration and Openness" type exists in jurisdictions like Japan, which includes USDC under its Payment Services Act alongside yen-pegged stablecoins such as JPYC, JPYSC, and Project Pax. The Philippines enables real-world usage through e-wallets, leveraging stablecoins for remittances that account for 8% of GDP, while Singapore has approved their issuance as a financial hub. Conversely, South Korea represents a "Regulatory Vacuum" type; with no won-pegged stablecoins and delayed legislation, USDT and USDC have filled the gap first, operating in a deregulated state. It is worth noting that some countries adopt a more positive attitude toward dollar-pegged stablecoins. As a reserve currency country, Japan is less concerned about its monetary status being challenged even if dollar-pegged stablecoins enter to some extent. The Philippines benefits from using stablecoins for remittances, and Singapore has granted issuance rights. In contrast, emerging economies with weaker monetary positions or facing dollarization pressures face higher barriers to defense. Regulations are dividing issuers into "domestic system" and "offshore" categories, a divide that will become clearer in the next one to two years as regulatory infrastructure is finalized in most jurisdictions. Although often referred to collectively as dollar-pegged stablecoins, it is primarily USDT and USDC, which account for 80% of the market share, that are affected by national policies. Regulatory and market factors are simultaneously impacting this oligopoly, and significant turmoil has already emerged in the dollar-pegged stablecoin landscape. In the future, the oligarchic status of these two issuers, changes in their share ratios, and the rise of non-dollar-pegged stablecoins could happen faster than expected. Europe has already shown this shift. Circle obtained licensing and brought USDC under the MiCA regulatory framework, making it the only large-scale dollar-pegged stablecoin legally available for retail use in Europe. Tether, however, did not apply for MiCA approval, and from late 2024 to the first half of 2025, USDT was gradually removed from EU-regulated exchanges such as Coinbase, Kraken, and Binance. Of course, USDT has not completely disappeared overseas. Tether is also trying to enter the regulated system by launching a compliance-oriented dollar-pegged stablecoin called USAT, in line with the implementation of the U.S. GENIUS Act. Similar changes are set to unfold soon in Asia. Starting with South Korea, where USDT dominates exchanges without specific regulation, once licensing and listing review processes are established, USDT and USDC will no longer operate in a deregulated state but will either be integrated into the system or excluded. Key trends to watch regarding USDT and USDC include different markets for the two tokens. USDC has gained recognition within regulated frameworks such as MiCA and Japan, while USDT remains primarily offshore. As more jurisdictions require licensed circulation, USDC, with higher compliance levels, will find it easier to meet listing requirements, while USDT, excluded from MiCA, risks being phased out. The actual effect of regulation may not be to reduce the overall dominance of dollar-pegged stablecoins but rather to shift USDT market share to USDC. Clear market differentiation is also emerging. In crypto trading and DeFi sectors, dollar-pegged stablecoins remain the backbone currency due to liquidity priorities, while non-dollar-pegged stablecoins are much smaller in scale.

However, within regulated systems, stablecoins like Japan's JPYC and Singapore's XSGD (StraitsX) have established themselves in real-world use cases, and institutional payments are gradually shifting away from USDT and USDC toward deposit tokens and institutional pilot projects. These are tools optimized for each country's financial infrastructure. Ultimately, as the market diverges, the stablecoin landscape will split into a dollar-based layer and a layer consisting of domestic currencies and deposit tokens. External regulatory pressure is increasing. When OUSD (Open USD) was launched in partnership with Coinbase and other entities, the market interpreted this as negative news for Circle. If this alliance model, where reserve asset profits are shared among issuers and distributors rather than held exclusively by the issuer, spreads, it could impact the revenue base of USDT and USDC.

Additionally, how regulatory authorities view and accept this initiative is another key indicator to monitor. This bifurcation marks a definitive end to the era of unregulated dollar dominance in Asian markets, signaling a future where compliance dictates market access more than liquidity alone.