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|Steven Jacob, foreign associate(left) and Thai Gia Han, junior associate from Indochine Counsel|
There are two types of virtual currency commonly known in Vietnam, in-game units which are used for making purchases in digital environments such as video games or contests, and cryptocurrencies. A third type is currently undergoing a pilot programme and is a cash-based digital payment which allows for non-banked individuals to deposit hard currency in their digital wallets.
Vietnam currently does not have any law or regulation particularly governing cryptocurrencies. Guidelines for this area are scattered in several legal instruments, such as the prime minister’s directives and official letters or dispatches of the State Bank of Vietnam (SBV), and can also be implied from certain prevailing legal regulations like those on non-cash payments.
In general, the laws of Vietnam do not recognise cryptocurrencies as legal means of payment. In fact, the government has taken steps to prohibit its use in Vietnam. The SBV is the state organ responsible for governing the trade in currencies and payments and as such, any regulations governing the use of cryptocurrency and all services related to its exchange, purchase, or sale would fall under its purview. As it is, the SBV has declared that cryptocurrencies, especially Bitcoin or Litecoin, are not legal means of payment in Vietnam and has prohibited their issuance, provision, and use as currencies or means of payment.
Despite this prohibition, Vietnam has been consistently ranked as one of the most active countries in cryptocurrency ownership. Possession of cryptocurrency is not prohibited, only its use as a means of payment within Vietnam. Therefore, investment in cryptocurrency is not prohibited. However, there are no regulations protecting investors or governing investment in the sector. The state has actually warned investors about potential risks when injecting money into cryptocurrencies.
Apart from being expressly prohibited from being used as a means of payment, the laws of Vietnam are currently silent on involving crypto in other fields. As part of his 5-year digital government strategy, the PM has assigned the SBV to study cryptocurrency with an eye to the possibility of adopting regulations for its use, but this recommendation was a single line in a rather long document. For now, cryptocurrency is almost completely unregulated in Vietnam.
As the regulator, the SBV performs the state management of banking and foreign currency exchange activities. In addition, the SBV plays the role of a central bank issuing money, banking for credit institutions, and providing monetary services for the government.
In 2020, the National Assembly has adopted a new investment law. In that law, it sets out a list of sectors that are prohibited for investment and a list of sectors that are subject to conditions. Sectors not on either list are open to investment without conditions.
While certain financial and credit related sectors are subject to conditional investment, and cryptocurrency could be inferred to be included in some of those, cryptocurrency is on neither the list of sectors prohibited for investment nor those subject to conditions.
In practice, no licensing authorities in Vietnam would issue an investment registration certificate to someone seeking to invest in cryptocurrency. This is the case despite the fact that investment in cryptocurrency is not technically illegal. For now, there are no formal mechanisms for investing in cryptocurrency recognized by the state.
Cryptocurrencies are not considered as either a legal form of payment in Vietnam, nor are they classified as a type of property. Under Article 105 of the Civil Code 2015, “property” is defined to include objects, money, valuable papers, and property rights. Property includes immovable property and movable property. Immovable property and movable property may be existing property or off-plan property.
As such, the establishment and/or operation of a trading platform or a crypto exchange for an asset which is not legally recognised, has yet to be permitted in the country.
The SBV has been directed to instruct credit institutions and organisations providing intermediary payment services not to implement transactions related to cryptocurrencies and to enhance the examination and timely report suspicious transactions related to cryptocurrencies.
The SBV is also to cooperate with the Ministry of Public Security to detect and handle violations related to cryptocurrencies. Other ministries are also required to take corresponding actions to further monitor transactions. This caution was recently extended further to include ATMs and bank card payment locations in relation to their use in payments for cryptocurrencies as they are deemed by the state to involve a high risk of money laundering or terrorist financing.
In June, the PM issued a 5-year strategy for digital government which includes a line item encouraging the SBV to study cryptocurrency on the blockchain and make recommendations regarding its possible adoption. We have also seen other reports regarding SBV committees formed to study cryptocurrency in the past two years, however, we have seen no evidence that these committees are actually conducting any activities nor issuing any reports to the public.
There are no particular regulations on blockchain. However, the government seems to favour and encourage the application of blockchain technology. In a report presented to the government in March 2020, the Ministry of Justice was researching and planning to complete the legal corridor in relation to applying and promoting products and services which are developed on blockchain-based platforms. The PM is also considering the implementation of a regulatory sandbox for certain fintech including blockchains.
Aside from the potential administrative and criminal penalties for the issuance, provision, or use of cryptocurrencies, the government is perhaps motivated in its prohibition of the technology by early fraudulent enterprises that abused the trust of the Vietnamese people. Vietnam was an early adopter of the technology and several cryptocurrencies proved to be scams. This prompted the initial prohibition of the technology and the government has yet to see a reason to reverse this decision.
Perhaps the new 5-year strategy may be a sign that the PM is now willing to consider cryptocurrency as a potentially legitimate technology for future adoption. For now, however, it remains a largely offshore means for parking investments by Vietnamese citizens.