What's There for Cryptocurrency if Legitimated in Vietnam?

The positive impacts of this digital, blockchain-based currency under the circumstance on Vietnam's economic status of being legalized.

Vietnam has received more attention on the international cryptocurrency map in recent years than it has in the past.

Statistics show that thanks to Bitcoin transactions alone, Vietnamese investors have earned a total profit value of up to 0.4 billion USD (equivalent to more than 9,000 billion VND) in 2020 alone, according to the report of Chainalysis.

According to a recent survey conducted by financial product comparison site Finder in 27 countries around the world, Vietnam is the most popular country for cryptocurrency access.

However, cryptocurrencies have not been recognized or protected by any legal corridor in Vietnam, despite being a potential business with a market capitalization of billions of dollars.

Pham Minh Chinh, the Prime Minister of Vietnam, has asked the country's central bank, the State Bank of Vietnam (SBV), to start working on a cryptocurrency pilot project. Between 2021 and 2023, the blockchain-based project is planned to be implemented. According to reports, this is part of the government's intention to build a digital economy strategy. The development follows the establishment of a research committee by Vietnam's Ministry of Finance, which has undertaken an in-depth investigation of cryptocurrencies in order to achieve legal reform for the business in the country.

Vietnam, like many other governments across the world, was unclear on how to respond to the rise of cryptocurrencies on its own. It's simple to understand why people are suspicious of cryptocurrency. Their immaterial nature puts state power, like state-owned banks, on the defensive, because they have no influence over the cryptosystem. Governments are also concerned about the dangers of speculation and manipulation, which might have disastrous consequences for national economies. Currently, Vietnamese law does not recognize cryptocurrencies as an asset or a foreign currency, and it does not identify them as a legal form of payment. SBV has declared bitcoin and other comparable cryptocurrencies to be illegal and prohibits their use in trade agreements. As a result, using, providing, and issuing cryptocurrencies in Vietnam can result in fines and imprisonment of up to $8,700. Having, trading, and investing in cryptocurrencies, on the other hand, is neither prohibited nor permitted; it is merely tolerated for the time being.

The government has charged the research group, which will focus on a variety of themes such as understanding the cryptocurrency industry, recognizing the existence of cryptocurrencies by amending the current law, building transparent, predictable, and efficient regulations, etc., in order to minimize the downsides associated with cryptocurrency.

Cryptocurrency regulation will boost Vietnam's economy in the long run

To begin with, it will give Vietnam the potential to generate additional income by taxing cryptocurrency transactions. By categorizing them as exchanges of foreign currencies or financial assets, formerly tax-free transactions may now be subject to a corporation or individual income tax. Furthermore, by assuring the safety and security of the cryptocurrency market, as well as shielding the national economy from related dangers, these provisions may be able to meet governmental demands for a public financial order. Finally, any regulations must allow cryptocurrency investors and startups to operate in a flexible and advantageous environment. Rather than restricting bitcoin trading, the protective framework should provide an incentive environment for more and safer exchanges — but some investors may withdraw from the nation as the government tightens its grip. The focus should then be on the legal system's transparency and predictability.

While cryptocurrency regulation is welcome, no date has been set for the bill's submission to the government.

References

1. Prodent, L. (2021). Vietnam Establishes Research Group to Study Regulations on Cryptocurrencies. Retrieved from https://www.vietnam-briefing.com/news/vietnam-establishes-research-group-study-regulations-cryptocurrencies-2.html/

2. Khang, M. (2021). Tiền mã hóa tại Việt Nam: Cần sớm hoàn thiện hành lang pháp lý. Retrieved from https://congly.vn/tien-ma-hoa-tai-viet-nam-can-som-hoan-thien-hanh-lang-phap-ly-194051.html

3. Trong, D. (2021). Người Việt kiếm lời hơn 9.000 tỷ đồng nhờ “tiền ảo” trong năm 2020. Retrieved from https://vietnamnet.vn/vn/cong-nghe/ung-dung/nguoi-viet-kiem-loi-hon-9-000-ty-dong-nho-tien-ao-trong-nam-2020-744999.html