Vietnam to Implement a Pilot Crypto Project

If the pilot project were to succeed, it appears Vietnam would go the central bank digital currency (CBDC) way. A raft of central banks around the world have been exploring CBDCs in a bid to hold off cryptocurrencies from upsetting the legacy financial order.

Vietnam’s move is quite the turnaround for the Southeast Asia country, which has previously shunned crypto and even outlawed it. The country is not the only one — more have recently woken up to the potential of blockchain-based money.

Why Now?

Deputy director of the Institute of Innovation Huynh Phuoc Nghia told Viet Nam News the pilot program will help the government assess the pros and cons of the “inevitable trend” that is cryptocurrency. Nghia noted that cashless payments have already carved out a place in Vietnam and that a central bank-backed digital currency would help accelerate this process.

July’s development follows the country’s move to research cryptocurrencies. In April, the Ministry of Finance assembled a research group to conduct an in-depth view of the technology. The aim was to use the insights to shape crypto legislative policies in the future. The research would also help Hanoi keep abreast with the rapid developments within the space.

The research group would look into these areas:

• A more informed view of the cryptocurrency industry
• To review existing law in relation to crypto
• To formulate transparent and effective crypto-related legislation
• To formulate legislation specifically addressing the volatility of the market
• To build capacity for effectively responding to developments and risks in the space
• To recommend practical tools for regulating crypto-related businesses

Bitcoin in Vietnam

Crypto has never been welcome in Vietnam. In 2014, authorities issued a strong repudiation of the sector, citing the dirty list of money laundering, tax evasion, and illegal trade. Authorities also cited the inherent risks involved in trading cryptocurrencies. As such, the government and central bank did not recognize Bitcoin as a legitimate medium of transactions.

That same month, the central bank dropped the whip on Bitcoin, blocking banks and other financial institutions from offering crypto services. In a statement, the bank referenced the fall of Mt.Gox and the temporary halts of exchanges like Bitstamp as evidence that cryptocurrency was no good.

In October 2017, the State Bank came out swinging again. This time, the institution declared it illegal to issue, provide and use “illegal means of payment” — meaning crypto. At the time, the ban dashed any hopes for crypto in the country. That’s because one year earlier, prime minister Nguyen Xuan Phuc had directed the Ministry of Finance to develop a legal framework for the industry.

In 2018, the State Securities Commission prohibited financial companies from issuing, transacting in, or engaging in the brokerage of cryptocurrencies and required them to observe legal requirements on money laundering.

The Crypto Scene in Vietnam

Despite their government’s reservation on Bitcoin, the Vietnamese are one the most active users of the cryptocurrency in the world. Per Statista, the country was rivaled only by Nigeria in the number of people saying they used or owned crypto. Ho Chi Minh — Vietnam’s largest city — hosts 11 Bitcoin ATMs. 

This same crypto enthusiasm in the country has emboldened scammers to prey on unwitting crypto investors. In 2018, one of the largest ‘exit scams’ took place in Vietnam as a group of seven nationals made away with about $660 million of investors’ money — in a scheme reminiscent of the infamous OneCoin fraud.

Operators of two crypto startups — Ifan and Pincoin — claimed the startups were based in Singapore and Dubai. The operators ran the non-existent crypto ICOs under the banner of the locally-based ‘Modern Tech’ company. Under this pretext, the company raised about 15 trillion Vietnamese dong (approx. $660 million) from about 32,000 people.

Both projects had the hallmarks of a Ponzi scheme. Older investors were being paid with cash flows from incoming ones, with investors being promised returns of 48% a month after their first investment. A lot about the promotional activity also reeked of fraud — with Modern Tech claiming both cryptocurrencies’ value rose daily.

Not Just Vietnam

Vietnam is not the only country waking up to the possibilities of crypto. In June, El Salvador took the plunge and made Bitcoin legal tender. In so doing, the Central American country made history as the first-ever to recognize Bitcoin at the state level. President Bukele lauded the move as an easier way for the Salvadoran diaspora community to send money home.

Paraguay seems to want to follow in the footsteps of El Salvador. After the latter classified Bitcoin as legal tender, Congressman Carlitos Rejala told Reuters that he’d be seeking to push a bill to regulate crypto. And last week, he tweeted to his 50k+ followers that he and Senator Silva Facetti would be presenting a Bitcoin bill in parliament, touting a “mega surprise for Paraguay and the world.”

And the Philippines wants to make the Philippines Stock Exchange (PSE) the official destination for citizens to exchange crypto. CEO Ramon Monzon told CNN Philippines that any “structured trading for crypto” should be in the bourse. Monzon wants would-be traders to know the PSE has “the infrastructure” and “investor protection safeguards” for seamless crypto trading. According to Monzon, this move is a result of crypto being an asset class that the country can no longer ignore.

Final Thoughts

After years of hardline cryptocurrency stance, it’s interesting to see Vietnam concede to the idea of a national cryptocurrency. While not exactly a seal of approval for the industry, Vietnam’s new foray is testament to the unstoppable cryptocurrency wave sweeping through the financial world. The lesson is simple: it’s no longer convenient to brush off crypto.