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Vietnam, a socialist country in Southeast Asia, has a population of 99.46 million and covers 331 thousand square kilometers. It has developed a strong market economy with socialist influences, making it one of the fastest-growing economies in terms of GDP. This economic growth has attracted significant foreign investment.
Cryptocurrency arrived in Vietnam in 2009, there are no specific rules for trading or holding Bitcoin, so it can be used as a good or asset. Bitcoin exchanges like Bitcoin Vietnam and VBTC operate freely, and Bitcoin mining is allowed. However, using Bitcoin as payment or issuing other digital currencies for payments is illegal.
Vietnamese Government on Cryptocurrencies
Cryptocurrency is not banned in Vietnam, but a legal framework is needed to ensure its proper development and mitigate risks, according to a representative from the Ministry of Justice. Cao Dang Vinh, Deputy Director of the Department of Economic and Civil Legislation, noted on April 12 that there are varying understandings of virtual assets, digital currencies, and cryptocurrencies, with different countries adopting diverse management approaches.
Cryptocurrency is not banned in Vietnam: MinistryCao Dang Vinh noted global variations in cryptocurrency perspectives and the absence of specific regulations in Vietnam.Vietnam lacks a legal framework for cryptocurrencies, stressing the need for regulation.Vietnam… pic.twitter.com/Vh9FWJwksk
— HaMy (@hamybinance) April 15, 2024
Cryptocurrencies carry risks that can lead to appropriation or money laundering. Vietnam currently lacks regulations to manage their development, and cryptocurrency is not considered a legal asset. Vinh emphasized the need for a legal framework to prevent these risks and illegal activities. The Ministry of Finance will provide specific proposals, and the Ministry of Justice will offer detailed opinions accordingly.
In addition to this, the Vietnamese state authorities are working on the possible applications of blockchain technology in the country.
Blockchain for Vietnam’s Cashless Society
The deputy Prime Minister of Vietnam, Vuong Dinh Hue signed out a policy decision in 2017, setting out the government’s plan to reduce the cash transactions in the country to less than 10%. The State Bank of Vietnam also announced the development of $700 million cashless payment network in collaboration with South Korean payment service provider Alliex.
Another bank, Tien Phong Commercial Joint Stock Bank(TPBank) moving one step further in the use of blockchain technology, joined hands with Japan’s SBI Ripple Asia to develop Ripplenet blockchain-based global payment network for processing cross-border transactions.
Launch of the First Money Transfer Servicebetween Japan and Vietnam that Utilize Distributed Ledger Technology (DLT)TPBank is the latest financial institutionsupported by SBI Ripple Asia to leverage Ripple https://t.co/oVMPDoYvVJ pic.twitter.com/TtdRXZby9B
— 𝗕𝗮𝗻𝗸 𝑿𝑹𝑷 (@BankXRP) November 15, 2019
Blockchain-based Smart City in Vietnam
We have successfully hosted Vietnam Tour De Web3 in Hanoi & Ho Chi Minh City. It was great to see & share ideas with over 3,800 blockchain & crypto investors there. Da Nang is our next destination, see you all soon #TourDeWeb3 pic.twitter.com/hQq6nsjRmt
— K300 Ventures (@K300Ventures) May 10, 2023
The Vietnamese government in 2017, launched its smart city project with the aim of developing Ho Chi Minh and Hanoi cities into Smart Cities by 2020 and 2030 respectively. The smart city project would be built with technologies like blockchain, 5G and facial recognition.
Cryptocurrencies law
In Vietnam, cryptocurrencies were not considered legal means of payment but could be bought, held, and traded. The government continued to reevaluate its approach to the crypto space, with the central bank maintaining that cryptocurrencies were not legal tender.
Cryptocurrencies were categorized as assets or goods under the 2015 Civil Code and the Commercial Law of 2005. These laws defined property broadly to include objects, money, valuable papers, property rights, and movable property, including future assets, allowing cryptocurrencies to be traded within the country.
What led to look over the need of Regulations?
The government of Vietnam cites many official reasons for the need for regulations and ban them as a means of payment,
The crypto industry has no government supervision and therefore prone to illegal activities.
Cryptocurrencies lack customer protection as they are volatile in nature which leads to price instability, security concerns, and market manipulation.
Cryptocurrencies are open to illegal activities such as tax evasion, money laundering, terrorist funding and hacking.
The cryptocurrencies might possess the capacity to destabilize existing financial systems which can affect the nation’s economy.
The Regulatory RoadMap of Cryptocurrencies
Vietnam has made several efforts to regulate the country’s cryptocurrency space. On 21 August 2017, the Prime Minister, Nguyen Xuan Phuc approved a project to complete the legal framework for managing digital assets and their activities.
On April 11, 2018, a directive was issued to the relevant authorities to manage crypto transactions in order to analyse the negative impact on the nation’s economy. In the directive, Bitcoin and similar cryptocurrencies were banned for using them as a mode of payments for any goods or services. But the users were free to invest in Cryptocurrencies. Those who found guilty would be penalised with a fine up to VND 200 million ($ 9,000).
In February 2019, The Ministry of Justice also filed a report that reviewed the current legislation on crypto-related business in the country. They proposed three different policies that the government could consider and start working on the policy selected by the government. They are,
Floating and lax Regulatory approach
Straightforward approach
Legislation of digital Assets transactions under specific conditions.
Recently on May 11 2020, the Vietnamese Finance Ministry has approved to establish a research group to review, analyse and develop various regulatory policies around crypto-assets. The research group would be comprised of nine members of the group of the following departments,
General Department of Taxation
National Institute of Finance
General Department of Vietnam Customs
Department of Banking and Financial Institutions of the State Bank of Vietnam
The research group would be led by the Vice-Chairman of State Securities Commission, Pham Hong Son.
Authorities in Vietnam to Establish Crypto Research Group to Evaluate PolicyOn May 11, the Ministry of Finance in Vietnam said it will come up with a research group responsible for examining & making policy proposals about crypto and virtual assets.https://t.co/pJ1RcqaDTr
— Crypto Adventure (@CryptoAdventure) May 11, 2020
Taxation and Mining
Taxes on Cryptocurrencies
As you have already aware of the fact that, Bitcoin and other cryptocurrencies are not considered as legal tenders and are banned to use them as a mode of payment, the tax policies are also not framed yet. Cryptocurrency taxation in Vietnam remains uncertain due to the lack of a clear legal framework.
The tax authorities have lost a lawsuit against a local citizen who was been taxed on the Bitcoin earnings. As the cryptocurrencies are not considered as a legal asset under Vietnamese law, the court ruled the authorities that they have no right to tax him.
Mining of Cryptocurrencies
The Cryptocurrencies remain illegal as of now and restricted with the use of payment methods and so the mining. It is also considered illegal The government has also has passed a law which bans the import of bitcoin mining equipment into Vietnam.
"Vietnam Proposes Import Ban on Bitcoin Mining Equipment" https://t.co/A61CuOPlSQ
— Life On Coin (@lifeoncoin) June 6, 2018
However, the Ministry of Industry and trade expressed displeasure towards the ban and also showed concern over the decline in the mining business. The ministry sent a proposal to the Prime Minister of Vietnam, called the Document 5964 / BTC – TCHQ, mentioning that the mining pieces of equipment are not listed in the banned list of import or unsafe list. Hence the import should be allowed which was accepted by the government.
Series of Events
12-04-2024: Vietnam Does Not Ban Cryptocurrency, Confirms Ministry of Justice
A Ministry of Justice representative clarified that while cryptocurrency isn’t banned in Vietnam, there’s a need for a legal framework to guide its development and mitigate risks. Cao Dang Vinh, Deputy Director of the Economic and Civil Legislation Department, noted varying global perspectives on virtual assets, digital currencies, and cryptocurrencies.
24-10-2022: Vietnam’s Prime Minister Urges Regulation of Cryptocurrency Vietnam’s Prime Minister Pham Minh Chinh called for new regulations on the crypto sector. He expressed impatience that virtual assets were not recognized but still traded. Chinh discussed these concerns during a group meeting about amending the anti-money-laundering law.
28-03-2022 : Vietnamese Deputy PM Urges Development of Legal Framework for Digital AssetsVietnam’s Deputy Prime Minister Le Minh Khai instructed the Finance Ministry to explore and revise laws to establish a legal framework for the digital asset market. He directed them to lead the development of this framework, coordinating with other ministries including Justice, Information and Communications, and the State Bank of Vietnam.
11-05-2020 :- Vietnam Government establishes a research group to review and access the crypto assets and also develop a regulatory framework for digital assets.
17-11-2019 :- Japan SBI Ripple Asia and SBI Remit announced a partnership with Vietnamese Commercial Bank Tien Phong Commercial Joint Stock Bank, in developing Japan-Vietnam Money transfer service using RippleNet DLT.
12-11-2019:- The State bank of Vietnam (SBV) is working on a new decree to regulate cryptocurrencies.
25-07-2018:– The State Securities Commission tightened its approach towards the cryptocurrencies. It banned public companies, securities companies, fund management companies, and securities investment funds from dealing with digital assets and its activities and required them to obey legal regulations on anti-money laundering law.
19-07-2018:- The government accepted the suspension of the import of the crypto mining equipment which was proposed by the Ministry of Industry and Trade.
12-04-2018:– Following a fraud that resulted in a loss of $ 15 Trillion Vietnamese Dong ($ 658 million), the Vietnamese government issued a directive to government ministries and, the central bank to tighten the cryptocurrency activities in the country.
30-10-2017:- The State Bank of Vietnam and The Central bank of Vietnam banned the use of digital currencies as a mode of payment which would be effective from the start of 2018. However, there was no ban on the investments on the digital currencies.
21-08-2017 :– Vietnamese Prime Minister Nguyen Xuan Phuc issued Decision 1255 to create a legal framework for managing virtual assets and currencies. He directed the State Bank, Ministry of Justice, Ministry of Finance, and Ministry of Public Security to provide legislative and regulatory recommendations for virtual currencies.
27-02-2014:- The State Bank of Vietnam issued a warning against investing in cryptocurrencies or carrying out any transactions due to harmful risks involved in criminal activities. It also determined that virtual currencies are not considered as legal tenders.
Concluding Note
The Vietnamese Government has now acquired a progressive approach towards regulating the cryptocurrencies and initiated various steps. The various other approaches, however, are still vague and lack clarity.
More laws and reforms are required to ascertain the secured flow of cryptocurrency transactions in the country so that no scams or fraud occur risking the investor’s funds. The future of the cryptocurrencies are more secure and reliable in the country when these regulatory frameworks are put in place.