Vietnam is playing catch-up in a global race to develop its own digital currency and experts believe this will not only help the Southeast Asian country develop new technology but also present an opportunity to join the most technologically-advanced nations.
Prime Minister Pham Minh Chinh last month endorsed the strategy for developing e-Government towards digital government in the 2021-2025 period. In Decision 942/QD-TTg issued on June 15, the State Bank of Vietnam (SBV) – the central bank – is assigned to research the pilot use of ‘virtual money’ based on blockchain technology in the next three years.
This is a remarkable change in the government’s policymaking given the reality that Vietnam has not yet recognised cryptocurrencies. So far, the central bank has repeatedly emphasised that owning and trading Bitcoin and other cryptocurrencies is risky for investors as these coins are not protected by law.
Virtual currency is a new concept in Vietnam. There are many different and confusing names in the market such as virtual money, electronic money, digital currency and cryptocurrency.
According to Investopedia, digital currencies can be considered a superset of virtual currencies and cryptocurrencies. Digital currencies can be regulated or unregulated currency that is available only in digital or electronic form. If issued by a central bank of a country in a regulated form, it is called a central bank digital currency (CBDC).
If existing in an unregulated form, it should be called virtual currency and may be under control of the currency developers instead of a centralised regulator. Cryptocurrencies are also an example of this type. Bitcoin and Ethereum are the most popular cryptocurrencies.
To date, Vietnam’s law has no specific definition of virtual currency and virtual assets. Current regulations only refer to the concept of electronic money (e-money) which is pegged to a fiat currency and exists in the form of pre-paid bank cards, e-wallets or mobile money.
SBV has repeatedly affirmed Bitcoin and other virtual currencies are not electronic money and cannot perform the function of a legal currency as a means of payment. Currently, SBV, the Ministry of Justice and the Ministry of Finance are studying the legal basis for managing virtual currency and virtual assets. The finance ministry has also set up a research group on this issue.
While most experts agreed the central bank should clarify the concept of virtual money in the latest Decision 942, finance specialist Nguyen Tri Hieu said the “virtual” word can lead to negative thinking as it has been associated with fraudulent projects spreading in the media.
“I think the central bank may use the concept of digital currency or cryptocurrency to reflect the intrinsic value of this form of money,” Hieu told Viet Nam News.
More than 60 central banks across the world are exploring and actively developing their own digital currencies to modernise financial systems as well as counter a possible threat from cryptocurrencies, according to PwC.