Vietnam to Pilot a Digital Currency Exchange
Vietnam to Pilot a Digital Currency Exchange
Prime Minister: Proposal for Digital Currency in March
The emergence of a legal framework for digital currencies is an inevitable requirement for Vietnam to catch up with the development trend of the global digital economy.
Dr. Nguyen Dinh Thai, a Public Management expert at the University of Economics and Law, Vietnam National University, Ho Chi Minh City (VNU-HCMC), asserted that establishing laws related to digital currencies is unprecedented. Therefore, a robust legal framework is necessary for effective management, creating a conducive environment for the development of the digital currency market, ensuring revenue for the state budget, combating crimes, and protecting investors.
Controlling Money Laundering Activities
Reporter: What is your assessment of the trend of digital assets and currencies in the current context?
Dr. Nguyen Dinh Thai: This is an inevitable objective trend as digital currencies, including cryptocurrency and central bank digital currencies (CBDC), are becoming an essential part of the global digital economy.
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According to statistics from the global investment firm Henley & Partners, in 2024, 172,300 individuals worldwide held over 1 million USD in cryptocurrencies, a 95% increase compared to 2023. Additionally, according to the analysis company CoinGecko, the total market value of cryptocurrencies reached a record high of nearly 3.2 trillion USD in November 2024.
In Vietnam, a report by Triple-A indicates that approximately 21.2% of the population owns cryptocurrencies, ranking second globally, only after the United Arab Emirates (UAE) with 34.4%.
Data from CryptoCrunchApp further reveals that Vietnam has about 25.9 million cryptocurrency owners, ranking third globally. Moreover, a report by Finder shows that the majority of Vietnamese cryptocurrency owners (70%) are aged 18-34, while only 25% are aged 35-54.
The increasing cryptocurrency transactions, the development of blockchain technology, and the rising demand for digital payments necessitate the establishment of a legal framework in Vietnam to manage, supervise, and harness the benefits of digital currencies.
With this trend, there is a need to promptly establish a legal framework for digital currencies. What are your thoughts on this?
In addition to the fact that digital currencies are an inevitable global trend that governments must address, establishing a legal framework for them is also a matter of national interest and security. A robust legal framework helps ensure the stability of monetary and financial policies. The widespread use of digital currencies can reduce the central bank’s role in controlling the money supply and complicate the implementation of monetary policies.
Without reasonable control, large flows of money into digital currencies can devalue legal tender, causing inflation or even financial crises.
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During 2021-2022, the significant volatility of Bitcoin and the collapse of platforms like FTX significantly impacted the global financial market, resulting in losses of billions of USD for investors. Hence, Vietnam needs a legal framework to control such risks and ensure economic stability.
A comprehensive legal framework will also help Vietnam protect the rights of individuals and entities owning and transacting in digital currencies, curbing the increasing number of scams and financial crimes associated with them.
According to a report by Chainalysis (a blockchain data analysis company in the United States), in 2022, financial crimes involving digital currencies exceeded 20 billion USD globally, with scams accounting for approximately 7.8 billion USD. In Vietnam, numerous scams related to digital currencies have been recorded, notably the collapse of the Coolcat exchange in 2021, which caused hundreds of billions of VND in losses for thousands of investors.
Particularly, a legal framework will aid in controlling and preventing money laundering and terrorist financing activities conducted through digital currencies. According to a United Nations report, approximately 2-5% of global GDP, equivalent to 800-2,000 billion USD annually, is associated with money laundering activities. Digital currencies are becoming a popular tool for executing illicit transactions. The 2016 hack of the Bitfinex exchange, involving 4.5 billion USD, and the Lazarus Group of North Korea being accused of laundering hundreds of millions of USD in digital currencies, serve as clear examples.
Furthermore, a clear legal framework will attract financial technology (fintech) companies and boost the digital economy.
Digital Currencies as Taxable Assets
To establish a suitable legal framework for Vietnam, what aspects should be considered?
Firstly, Vietnam’s legal framework should recognize digital currencies as a type of asset, helping define the rights and obligations of investors, protecting their interests, and promoting the development of the digital currency market.
In reality, many countries have treated digital currencies as taxable assets and applied corresponding regulations. For instance, the United States considers digital currencies as assets per the regulations of the Internal Revenue Service (IRS), requiring individuals holding cryptocurrencies to report income and pay taxes. In the European Union, the MiCA Regulation has introduced provisions on the trading and custody of digital assets, creating a clear legal environment.
Simultaneously, there should be regulations regarding a specialized agency responsible for supervising digital currencies in Vietnam. Globally, numerous countries have established agencies to manage digital currencies and control activities related to money laundering.
In Vietnam, it is necessary to establish a specialized agency under the management of the State Bank or the Ministry of Finance to license and supervise the activities of digital currency exchanges, develop and enforce KYC/AML (Know Your Customer and Anti-Money Laundering) regulations, control financial risks, and protect investors. This agency should also coordinate with international organizations to prevent fraud and financial crimes.
Imposing Criminal Penalties for Scams and Tax Evasion
How stringent should the legal framework be, considering that digital currencies are unprecedented?
I believe that the first step is to define and clarify the nature of digital currencies, including their various forms. It is also essential to distinguish between real money transacted in the digital space and digital currencies, investment products, and payment instruments to safeguard the interests of individuals and businesses. Additionally, we must identify national digital currencies. Based on these distinctions, we can determine the scope of regulation, including classifying recognized types of digital currencies, defining the responsibilities of involved parties, and establishing appropriate management principles.
For example, in the United States, the Securities and Exchange Commission (SEC) classifies certain cryptocurrencies as securities, while the Internal Revenue Service (IRS) considers them taxable assets.
In Singapore, the Monetary Authority of Singapore (MAS) allows specific cryptocurrencies to be used as legitimate means of payment. Conversely, China has completely banned cryptocurrency transactions but is developing its national digital currency (CBDC).
Regarding Vietnam, determining the scope of regulation involves considering whether to recognize cryptocurrencies as assets, means of payment, or investment instruments. This clarification will promote clarity in management, protect the interests of citizens, and foster the development of the digital economy.
The legal framework for digital currencies should include regulations on the registration and licensing process and conditions for exchanges. To obtain a license, exchanges must register with the financial crime network, the Ministry of Public Security for security in banking transactions, anti-money laundering regulations, and customer identification. The licensing authority must set standards for the financial capacity of exchanges, data security requirements, transparency in transaction information, organizational structure, and operations, as well as establish a risk management mechanism to prevent fraud and tax evasion.
In parallel, regulations are needed to protect individuals and entities owning and transacting in digital currencies. Exchanges and digital currency projects should be required to disclose information about their products, risks, and operating models. Regulations should also address compensation and insurance mechanisms for digital currencies.
Particularly, the law should strictly prohibit digital currency projects from soliciting investments from individuals. Exchanges intending to offer token sales must register with the regulatory authority beforehand. Most projects that issue tokens by raising funds from individuals before listing on an exchange without registering with the competent authority are scams and violate asset ownership laws.
I believe that regulations regarding taxes and the recognition of digital currencies within the national tax and financial policy system are of utmost importance for managing and developing the digital currency market.
Legal regulations should recognize digital currencies as assets and apply tax policies similar to those for traditional assets during transactions or sales. The tax rate should be set at an appropriate level to encourage market development and tax declaration.
Additionally, stringent regulations are necessary for data security, information safety, and network security in the digital currency market. These regulations should include requirements for multi-factor authentication to prevent unauthorized access, procedures for transferring digital currencies and electronic wallets to ensure safety and reduce the risk of attacks, and mandatory data storage on domestic servers to enhance Vietnam’s control over the market.
Furthermore, there should be regulations for monitoring and handling administrative violations related to unlicensed activities and transaction fraud. Criminal liability should be established for exchanges and individuals engaging in transactions that exploit the digital currency market to scam, appropriate assets, or evade taxes.
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Testing in International Financial Centers The management and development of the digital currency market must be linked to the nation’s financial centers and international connections. Therefore, after establishing the basic legal framework, it is necessary to implement testing mechanisms in exchanges associated with international financial centers such as Ho Chi Minh City and Danang to obtain practical and accurate assessments before formulating subsequent policies. Vietnam can consider piloting a sandbox model with a suitable scale for exchanges and fintech companies based on blockchain technology, encrypted assets, and digital banking to stimulate the development of the digital financial ecosystem alongside the traditional financial ecosystem in the country’s financial centers. Moreover, we should aim to establish Vietnam’s digital currency ecosystem and develop a national digital currency. We need to build and promote consensus for this currency in transactions with other countries, positioning Vietnam as a global leader in blockchain technology and the digital currency market. DR. NGUYEN DINH THAI, UNIVERSITY OF ECONOMICS AND LAW, VIETNAM NATIONAL UNIVERSITY, HO CHI MINH CITY |
Interviewed by LE THOA
– 05:40 08/03/2025
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