Vietnam to Start Regulating Cryptocurrencies
- While cryptocurrency trading and use are booming globally in terms of popularity, the Vietnamese legislation makes no reference to such transactions.
- Vietnam’s Ministry of Finance established a research group that has begun an in-depth study of cryptocurrencies, with a view to achieving legislative reform for the industry in the country.
- An estimated one million Vietnamese are already using cryptocurrencies: this figure is expected to increase 30-fold by 2030.
On March 30, 2021, Vietnam’s Ministry of Finance established a research group, which has begun an in-depth study of cryptocurrencies, with a view to achieving legislative reform for the industry in the country.
While cryptocurrency trading and use are booming globally in terms of popularity, the Vietnamese legislation makes no reference to such transactions.
Yet, the current transition of Vietnam’s economy offers a particularly favorable context for cryptocurrencies. Payment methods are increasingly cashless, as the Vietnamese steadily embrace apps, QR codes, and e-wallets (such as Moca, Momo, or ZaloPay). At the same time, the government is pushing for electronic payments with the Prime Minister signing a decision in 2017 to reduce cash transactions by 90 percent by 2020.
What’s more, an estimated one million Vietnamese are already using cryptocurrencies: this figure is expected to increase 30-fold by 2030. The market should be quite profitable in the years to come.However, cryptocurrency crime is rife in the country with currency thefts, regular hacks, and cyber scams among the crimes being reported. In 2018, the Vietnamese startup Modern Tech had gone off radars after scamming some thirty thousand people investing in nebulous cryptocurrency projects and initial coin offerings (ICO). Investors lost some US$660 million.
Therefore, implementing a legal device to manage and handle virtual assets is the current challenge of Vietnam. It would also set boundaries to abusive cryptocurrency transactions, which is the government’s main concern.
A legal gap reflecting mistrust and confusion
Like many other states in the world, Vietnam did not know, until today, how to respond to the surge of cryptocurrencies on its territory.
Suspicion towards cryptocurrencies is easily explained. Their immaterial nature challenges state authority, such as state-owned banks that have no control over the cryptosystem. Governments are also hugely concerned about the risks of speculation and manipulation that may have tremendous impacts on national economies. In addition, the swift variability of virtual currencies and the general lack of knowledge triggers reactive legislative processes. As a result, legal gaps are found globally.
As of today, Vietnamese law does not mention cryptocurrencies as a legal means of payment, and neither does it recognize them as an asset or a foreign currency. Bitcoin and other similar cryptocurrencies have been expressly designated by the State Bank of Vietnam as illegal and banned for trade relationships. Therefore, using, supplying, and issuing cryptocurrencies on the territory is liable to fines — up to US$8,700 — and imprisonment. However, possessing, trading, and investing in cryptocurrencies is not forbidden nor permitted; it is only tolerated for the time being.
In any case, such a legal gap is risky; to minimize the drawbacks arising from cryptocurrencies, it is urgent for Vietnam to act.
The research group will focus on an array of topics
The primary topics that the research group will focus on are:
- 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 to conduct a search on laws already enacted by the United States, the European Union, and Japan.
The significant stakes for regulating cryptocurrencies
The long-term public, social, and economic benefits of any future regulations are numerous.
First, it will provide an opportunity for Vietnam to make additional revenue through taxation from the trade of cryptocurrencies. By defining them as exchanges of foreign currencies or financial assets, such exchanges, previously tax-free, may fall within the scope of corporate or personal income tax.
In addition, regulating cryptocurrencies in Vietnam should effectively fight fraud and abuses related to virtual currencies, such as money laundering, hacking, or the anonymous financing of other illegal activities. For instance, Japan opted since in 2017 for forced identification of cryptocurrency users; Japanese stock exchanges are required to check and record the identity of clients, as well as keep complete transaction records. This remedy for fraud could possibly be studied by the research group.
What’s more, these provisions could address governmental demands for public financial order by ensuring the safety and the security of the cryptocurrency market, as well as protecting the national economy from related risks. In the same way, it shall ensure a protective legislative environment for lay consumers of cryptocurrencies. The government’s attitude towards cryptocurrencies would then shift from passive recommendations and warnings to a proactive protection tool.
In the end, any regulations must provide a flexible and favorable environment for cryptocurrency investors and startups. The protective framework, rather than curbing cryptocurrency trade, should establish an incentive environment for more and safer exchanges — although some investors may cease their activities in the country as the government increases its scrutiny. The emphasis should be then on the transparency and the predictability of the legal system.
No date has yet been given by the government for the submission of the bill.
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