The path to adopting suitable digital asset system

How do you assess the current legal landscape for digital assets worldwide?

Nguyen Tran Minh Quan, legal director of the Vietnam Blockchain Association

At present, the development of legal frameworks for digital assets is progressing rapidly across the globe. Recently, the digital asset market has reached nearly $4 trillion, prompting many countries to take a more serious stance, recognising that this is no longer just a passing trend. Governments are striving to balance fostering innovation with ensuring user safety.

According to a survey by the Bank for International Settlements, two-thirds of the 86 jurisdictions studied are currently developing legal frameworks for digital assets. The markets with the most advanced regulatory systems include the United Kingdom, Australia, Brazil, South Korea, Japan, and the EU, where the Markets in Crypto-Assets (MiCA) regulation came into effect in 2024.

MiCA is a unified regulatory framework applicable across the entire EU, creating a transparent legal environment for digital assets. This legislation not only governs activities of token issuers but also imposes stringent oversight on service providers, including exchanges.

South Korea has placed particular emphasis on monitoring cryptocurrency exchanges, given past challenges in that sector. Japan, on the other hand, has prioritised the regulation of stablecoins, while the United States employs two separate regulatory bodies, the Securities and Exchange Commission and the Commodity Futures Trading Commission, to oversee the market.

If Vietnam were to adopt a legal framework for digital assets, which model would be most suitable?

MiCA would likely be the most appropriate model, as it requires all token issuers and digital asset service providers to comply with stringent anti-money laundering and counter-terrorism financing regulations, aligning with the standards set by the Financial Action Task Force. This is particularly relevant for Vietnam, as in 2024, Vietnam outlined a national action plan to remove Vietnam from the task force’s “grey list”.

MiCA’s stringent anti-money laundering and counter-terrorism financing regulations have exerted pressure on the global market, prompting other jurisdictions to refine their own frameworks to meet these high standards, thereby fostering trust and investment.

Furthermore, if Vietnam adopts MiCA as the foundation for its regulatory framework, domestic enterprises will have the advantage of early exposure to the European market. By adhering to MiCA’s regulations, Vietnamese businesses would be legally recognised across all 27 EU countries. This would be a significant benefit, reducing both time and effort.

Should Vietnam fully adopt MiCA, or should modifications be made to suit its specific conditions?

As Vietnam continues to develop its legal framework for digital assets, MiCA serves as a valuable reference. However, the adoption of international models must be adjusted to align with its practical circumstances.

This underscores the need for lawmakers to carefully consider the challenges faced by enterprises, particularly small and medium-sized ones. Striking a balance between regulatory control and fostering innovation is crucial to avoiding setbacks for Vietnam’s economy.

One potential drawback of MiCA is the high cost of compliance, which could pose significant challenges for small and medium-sized enterprises. Strict regulatory requirements may create barriers to innovation and progress within the industry.

Additionally, there is a risk that businesses will seek out more cost-effective and less restrictive jurisdictions. A recent example is Coinbase, which announced the termination of its stablecoin interest programme in Europe. The fact that a major player like Coinbase has altered its business strategy illustrates the considerable regulatory pressures that MiCA is placing on stablecoin enterprises.

What advice would you offer to regulatory authorities in Vietnam as they develop legal frameworks for the digital technology industry?

I had the opportunity to review a draft of Vietnam’s Digital Technology Industry Law. One notable aspect is that the definition of digital assets and tokenised assets under Article 14, Section 3, aligns well with international norms. It is closely related to FATF’s guidelines and the definitions found in MiCA.

However, a later section of the law introduces additional criteria stating that only “legal” digital assets fall within the scope of regulation. I believe this approach is problematic because, in legal theory, the existence of an asset is not contingent upon its legality. Even from a regulatory standpoint, for instance, while Europe recognises tokenised assets and China does not, the assets themselves still exist, they do not cease to exist simply because one jurisdiction deems them illegal.

From a practical perspective, governments typically regulate new phenomena and emerging products after they have already appeared. If the definition of digital assets is inherently tied to legality, then assets yet to be officially recognised would fall outside the regulatory framework, potentially leading to the emergence of informal or unregulated markets that are difficult to control.

Therefore, to foster growth, Vietnam must build a regulatory framework with a dual perspective, both safeguarding national interests and creating an enabling environment for businesses to thrive.