In a country like Vietnam, with a stable main currency, cryptocurrencies are surprisingly popular. In fact, the country has the second-highest rate of cryptocurrency use in the world.
Picture this, with just a smartphone and an app, amateur investors can start mining cryptocurrency, the process in which transactions between users are verified and added to the blockchain public ledger. Fueled by instant millionaires and soaring bitcoin prices, the craze just doesn’t stop.
As for those who want to broaden their knowledge, podcasts and some creative solutions can be found everywhere — including a sitcom dedicated to cryptocurrency.
Despite its popularity, cryptocurrency in Vietnam is problematic. This type of digital currency has not been recognized as a legitimate means of payment, and there is no definition of cryptocurrency under the laws of Vietnam.
As countries, including Vietnam, continue to explore and roll out their own digital currencies, concerns over cryptocurrency transactions are growing.
MoF to regulate cryptocurrencies
“Vietnamese laws do not allow such cryptocurrency to act as a kind of legal tender in Vietnam,” Vice Governor of the State Bank of Vietnam Dao Minh Tu said during a government press conference, adding that bitcoin and other types of cryptocurrency are not lawful means of payment in the country.
In plain words, cryptocurrency is illegal in Vietnam.
The Vice Governor further reiterated that only credit institutions with permission from competent authorities are authorized to provide such services for domestic and international markets.
“So far, local authorities have not issued a license for any forex trading floor. Therefore, all transactions on these floors are illegal,” the Vice Governor told Hanoitimes, urging investors to be cautious from advertisements of these platforms with promises of soaring profits despite the current difficult economic climate.
Hence, people who are taking part in illegal forex activities face huge risks and are not protected by law. Investors must consult the local authorities and credit institutions before putting their money on any investment channel.
Suspicion towards cryptocurrencies is easily explained but like many global governments, Vietnam remains unsure how to respond to the surge of cryptocurrencies on its territory.
“Their immaterial nature challenges state authority, such as state-owned banks that have no control over the cryptosystem. Governments are also significantly concerned about the risks of speculation and manipulation that may have tremendous impacts on national economies,” reads the Vietnam Briefing report.
In 2018, a Vietnamese startup had gone off radars after scamming some 30,000 people investing in nebulous cryptocurrency projects and initial coin offerings (ICO). Investors lost some US$660 million.
Vietnam’s economy offers a particularly favorable environment for cryptocurrencies and an estimated one million Vietnamese are already using cryptocurrencies. The number is expected to increase 30 times in 2030. Therefore, implementing a legal device to manage and handle virtual assets is the current challenge for Vietnam’s government.
Despite that, the Vietnamese government and the State Bank of Vietnam are working on a legal framework to manage cryptocurrency and virtual assets.
Recently, the Ministry of Finance established a research group, “which began an in-depth study of cryptocurrencies, with a view to achieve legislative reform for the industry in the near term.”
As stated in the report by Dezan Shira & Associates, the government has tasked the research group, which will focus on an array of topics:
- To understand the cryptocurrency industry;
- To recognize the existence of cryptocurrencies by amending the current law;
- To build transparent, predictable, and efficient regulations;
- To build responsive legislation concerning the high variability of the market: even though Bitcoin is at the heart of concerns due to its popularity among insiders and the common people, the market is much larger, and more currencies are to appear over the next few years;
- To recommend structural adjustments by creating mechanisms to monitor the cryptocurrency market through skilled supervisory bodies — attentive to market conditions, to the emergence of new currencies, and ready to respond quickly and effectively to the risks; and
- To recommend tools to these supervisory bodies, namely powers to issue, suspend or revoke licenses, to regulate business practices, and to report suspicious activities.
To this end, the group is tasked to conduct a search on laws already enacted by the US, the EU, and Japan.
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Other Asian governments urge “extreme caution”
Speaking of Japan and regulations, last month, Japan issued stern warnings to their citizens about crypto’s potential risks and pitfalls, the same goes for South Korea. A week after, even crypto-friendly Singapore released a warning to the public to exercise “extreme caution” when trading cryptocurrencies.
“Cryptocurrencies can be highly volatile, as their value is typically not related to any economic fundamentals,” Tharman Shanmugaratnam, chairman of the Monetary Authority of Singapore (MAS), told Forkast in a written reply to a parliamentary question on the country’s crypto-asset market. “They are hence highly risky as investment products, and certainly not suitable for retail investors.”
The Singapore government’s warning comes as other governments across Asia are also adopting a tougher stance on Bitcoin and other cryptocurrencies. This month, India began requiring companies to comply with tougher financial disclosure rules when it comes to crypto dealings.
Now that more and more countries are expressing concerns, “it is important that the industry rallies together and clarifies some of the assumptions and issues raised,” cryptocurrency users say.
Others say that while public warnings about crypto volatility and the potential for scams may be justified, the government and media should also be careful not to reject the favorable effects of this digital currency along with its cons.