South East Asian state Vietnam explores crypto as the Prime Minister says he wants the country to adopt crypto-friendly regulations and issue a blockchain-based digital currency. Central Bank to study and pilot cryptocurrency implementation.
Pham Minh Chinh, the Prime Minister believes that digital currency is an “inevitable trend” as Vietnam explores crypto. The country’s leader has asked the State Bank of Vietnam (SBV) to pilot cryptocurrency implementation from 2021 until 2023. He added, that the country had seen a climb in cashless payments and the “recognition of digital currencies by the central bank would help to accelerate this process.”
In addition, Huynh Phuoc Nghia, deputy director of the Institute of Innovation under the University of Economics HCM City, says the crypto pilot aims to assist the government in evaluating the benefits and drawbacks, while developing an appropriate management mechanism.
Vietnam’s e-government development strategy, which includes cryptocurrencies, also involves assessing artificial intelligence, big data, augmented reality, virtual reality and blockchain technology. The country’s Ministry of Finance created a research group focused on studying crypto-related regulations in May. Previously, Vietnam has stated that cryptocurrencies are not legally recognised in the country.
Since 2017, Vietnam has banned the utilization of cryptocurrencies in payments and in 2018, commercial banks and payment service providers were prohibited from making transactions with crypto. The State Bank of Vietnam argued that activities associated with digital assets could increase the risk of money laundry, terrorism financing and tax evasion. At the time, the Prime Minister issued a directive on strengthening the management of activities related to the new asset class.
Among the central banks working on projects to issue central bank digital currencies are those of China, Russia, the U.S., and the Eurozone. The People’s Bank of China has the most advanced project so far, with numerous domestic trials underway and a plan to test the digital yuan (e-CNY) in cross-border transactions with Hong Kong, despite the Chinese Government’s effective banning of crypto in the country.
Central banks worldwide — including the Reserve Bank of India (RBI) — have been considering blockchain-based implementations for fiat currencies, and Chính’s decision could be around the same. He has asked the bank to mull digital currencies as part of Vietnam’s e-Government development strategy.
That said, the move is a shift for Vietnam’s regulatory scenario so far. The country’s Ministry of Finance had created a group to study virtual assets in April last year. The report suggests that the new study will help the country find “positive and negative aspects” of cryptos.
What are the significant stakes for regulating cryptocurrencies?
The long-term public, social, and economic benefits of any future regulations are numerous. While cryptocurrency trading and use are booming globally in terms of popularity, the Vietnamese legislation makes no reference to such transactions.
First, it will provide an opportunity as Vietnam explores crypto, 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. 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.
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.