Taiwan is preparing to launch its first regulated stablecoin, potentially in late 2026, but key decisions regarding its currency backing are still pending. The Financial Supervisory Commission (FSC) is working on the Virtual Assets Service Act, which has passed initial reviews and may soon advance to a third reading. The FSC indicates that while banks will likely lead the stablecoin issuance, other financial institutions may participate as well. One of the central issues is whether the stablecoin will be pegged to the Taiwan dollar or the U.S. dollar. A U.S. dollar backing could sidestep Taiwan's strict regulations against the offshore circulation of its currency, which complicates cross-border transactions. Currently, the central bank actively monitors attempts to use the Taiwan dollar for transactions without a direct link to the island, making a U.S. dollar peg potentially disruptive to established currency controls. Regulators are focusing on creating stringent rules for the stablecoin, emphasizing full reserve backing and domestic asset custody. However, the unresolved backing currency will significantly impact the stability and functionality of the stablecoin, determining whether it serves as a safe payment tool or disrupts Taiwan's monetary framework.