FSC rejects Federal Bank's investment in MaiCoin's parent company: Lack of operational substance violates Banking Act, alternative plan adopted

The Financial Supervisory Commission (FSC) has blocked Union Bank of Taiwan (2838) from directly acquiring a stake in the offshore holding company of the MaiCoin Group, citing that the "offshore holding company lacks actual operations and does not comply with the Banking Act," and has declared the investment project void. Union Bank of Taiwan immediately sought an alternative path, planning to have an affiliate of its major shareholders step in to take over the investment. (Previous coverage: MaiCoin Group completes Series B+ funding! Far EasTone Telecommunications, Union Group, and Ho-Ding Venture Capital participated, accelerating IPO plans) (Background: First in Taiwan! Union Bank of Taiwan partners with MaiCoin to officially launch "Virtual Asset Custody Pilot Business") The fatal flaw of this investment lies in Article 74 of the Banking Act. The article stipulates that commercial banks must obtain prior approval from the competent authority for investments in both financial and non-financial related businesses, and the investee must possess "actual operations." If the investment is in a non-financial related business, the bank's shareholding limit is capped at 5% of the issued shares. Modernity Financial Holdings, Ltd is an offshore holding structure established in the Cayman Islands. The FSC determined that it does not qualify as a financial-related business and lacks any actual operations, thereby closing the door for approval. Union Bank of Taiwan revealed in its announcement that the FSC had issued verbal warnings regarding potential disputes early in the process, but the bank insisted on a written interpretation for corporate governance tracking. After a period of administrative correspondence, the FSC finally issued a formal written response confirming that the investment did not comply with regulations. According to the original board resolution disclosed in the Union Bank of Taiwan announcement on May 11, the scale of this investment was significant: the bank planned to invest approximately USD 27.817 million to acquire 5.357 million shares of Modernity Financial Holdings, Ltd, while also transferring the shares originally held by Union Venture Capital, bringing the total shareholding to 9.67%. Today, this blueprint has been officially declared void following the FSC's written interpretation. However, Union Bank of Taiwan has not given up. It is understood that the bank will subsequently have an affiliate of its major shareholders step in to directly invest in Modernity Financial Holdings, Ltd, achieving the same strategic layout through a different entity and bypassing the shareholding restrictions of the Banking Act in legal form. Union Bank of Taiwan emphasized that this move is out of respect for the competent authority's decision and does not represent an abandonment of its strategic positioning in the MaiCoin ecosystem. As of now, the adjustment in the equity structure has not shaken the business cooperation already established between the two parties. The cooperation between Union Bank of Taiwan and MaiCoin covers co-branded credit cards, USD deposit services (linked to Union Bank foreign currency accounts), and Taiwan's first virtual asset custody pilot business. Union Bank of Taiwan stated that the aforementioned cooperation models remain unaffected. BlockTempo previously reported that at least four financial holding companies in Taiwan are rumored to be interested in entering the Virtual Asset Service Provider (VASP) landscape, with MaiCoin, BitoGroup, and HOYA BIT among the potential targets. The integration of Taiwan's traditional finance and the crypto asset industry continues to move forward. Further reading: 4 Taiwanese financial holding companies rumored to be interested in acquiring VASP exchanges; MaiCoin and BitoGroup are on the list; Fubon and Union Bank of Taiwan take the lead.