Vietnam Urged to Establish a Legal Framework for Digital Assets and Cryptocurrency

Vietnam is one of the countries with the highest rate of people owning cryptocurrency in the world.

Government Initiatives

The Prime Minister has instructed the Ministry of Finance to finalize a pilot resolution for managing virtual and digital assets. A report on this initiative is due to the Standing Government Committee by March 13. Earlier, both the Ministry of Finance and the State Bank of Vietnam were tasked with formulating a legal framework for digital assets and cryptocurrencies within the same timeframe.

Experts view the piloting of a cryptocurrency exchange in Vietnam as a major opportunity to develop the digital asset market and promote a digital economy. However, they caution that without a robust legal framework, the initiative poses substantial risks that require careful management.

Opportunities and Risks in the Digital Asset Market

Dr. Dang Minh Tuan, Chairman of the Vietnam Blockchain Alliance, highlighted that digital asset inflows into Vietnam reached an estimated $105 billion to $120 billion in 2023, accounting for nearly a quarter of the country’s GDP. He emphasized that digital assets play a crucial role in the digital economy, positioning Vietnam as a potential regional and global hub for blockchain-based financial transactions.

However, he also warned that the market is highly volatile, with fluctuations that differ significantly from traditional stock markets. "Digital assets and cryptocurrencies facilitate seamless cross-border transactions, often involving anonymous trading, which presents challenges in controlling money laundering and terrorist financing," Tuan noted.

Given Vietnam's limited experience and lack of a tested legal framework in this emerging sector, he stressed the need for regulatory oversight and licensing of cryptocurrency exchanges. "An oversight authority should assess whether digital asset exchanges meet technical standards, implement anti-money laundering measures, ensure consumer protection, and maintain liquidity. Additionally, an insurance fund should be introduced to compensate users in cases of cyberattacks or asset loss," he suggested.

Tuan also called for greater monitoring of unusual transactions, enhanced international cooperation, and improved cybersecurity measures. He pointed to regulatory models in countries such as Singapore, Japan, Dubai, and China, each of which has adopted different approaches to digital asset governance. He emphasized that Vietnam must clearly define the legal status of cryptocurrencies—whether they are classified as assets, securities, or utility tokens—to avoid regulatory conflicts.

Establishing a Legal Framework

Associate Professor Dr. Nguyen Huu Huan from the University of Economics Ho Chi Minh City noted that Vietnam’s current accounting standards do not recognize digital currencies or assets as legitimate financial holdings. He suggested that the first step in the legal framework should be acknowledging digital assets and allowing businesses to record them in financial statements.

Huan emphasized that any cryptocurrency exchange must prioritize anti-money laundering measures and counterterrorism financing regulations. "Most digital assets worldwide are traded anonymously. The key question is whether Vietnam will permit anonymous transactions. If allowed, it will be difficult to regulate; if not, there must be an appropriate mechanism to oversee such activities," he said.

One potential solution is requiring centralized cryptocurrency exchanges to disclose transaction details transparently and provide information upon regulatory request. "Government-managed exchanges would ensure transparency, security, and minimize the risks of money laundering," Huan added.

From a monetary policy perspective, he raised concerns about how the recognition of digital currencies could impact Vietnam’s economic stability. The introduction of non-government-issued currencies could complicate money supply management and disrupt traditional financial models. "The supply and demand of money will shift away from conventional models, requiring the State Bank of Vietnam to carefully study and develop a regulatory framework that ensures digital currencies support, rather than undermine, monetary policy," he said.

The Role of a Central Bank Digital Currency

Huan also stressed the importance of implementing a central bank digital currency (CBDC). The State Bank of Vietnam has already conducted research on this initiative, and launching a CBDC could facilitate cryptocurrency exchange transactions while establishing an official mechanism for integrating with global digital assets.

Additionally, he emphasized the need for Vietnam to regulate cross-border financial flows in digital transactions. "Cryptocurrency exchanges should be strategically positioned in international financial centers where cross-border transactions can be efficiently managed. This approach would allow Vietnam to leverage global financial trends while maintaining monetary security and minimizing risks," he concluded.

Conclusion

As Vietnam explores its role in the digital asset economy, establishing a comprehensive legal framework is essential to balancing opportunities and risks. Regulatory clarity will not only support innovation but also protect investors, ensure financial stability, and align Vietnam with global financial trends. The government’s efforts in piloting digital asset exchanges and considering a CBDC will be critical steps in shaping the future of Vietnam’s digital economy.

Frequently Asked Questions (FAQs)

1. What is a central bank digital currency (CBDC)?

A CBDC is a digital form of a country’s fiat currency, issued and regulated by the central bank. It functions as a secure and government-backed alternative to private cryptocurrencies.

2. Why is Vietnam considering a CBDC?

Vietnam is exploring a CBDC to enhance financial stability, regulate digital transactions, and integrate with global financial markets while reducing risks associated with private cryptocurrencies.

3. What are the main risks of cryptocurrency trading in Vietnam?

The primary risks include market volatility, potential money laundering, terrorist financing, cyberattacks, and lack of a clear regulatory framework.

4. How will Vietnam regulate cryptocurrency exchanges?

Vietnam plans to regulate cryptocurrency exchanges through licensing requirements, anti-money laundering measures, consumer protection policies, and oversight authorities to ensure transparency and security.

5. What can Vietnam learn from other countries' regulatory models?

Vietnam can take insights from Singapore’s regulatory sandbox approach, Japan’s strict exchange governance, Dubai’s blockchain-friendly environment, and China’s outright ban on cryptocurrency trading.

6. Will Vietnam allow anonymous cryptocurrency transactions?

Regulators are still deciding whether to permit anonymous transactions. If allowed, they could pose challenges in regulation; if restricted, appropriate oversight mechanisms would be necessary.

7. How will digital assets impact Vietnam’s economy?

Digital assets could boost Vietnam’s digital economy and financial sector but may also pose monetary policy challenges, such as affecting money supply and financial stability.

'Pi mining' fever surges as diggers hope to catch Bitcoin-level profits For the hope of profits in an uncertain future, Pi miners are making trade-offs from phone numbers, personal photos, identification, access to phones, and more.

State Bank Deputy Governor: Bitcoin is not legal in Vietnam Deputy Governor Dao Minh Tu affirmed that Bitcoin and other virtual currencies are completely not considered as cryptocurrencies, and not allowed to function as legal ...

Vietnam - A Pioneering Blockchain Nation According to experts, a young population and fast adoption of technology are the key factors that make Vietnam become one of the leading countries in ...

Digital Currency Management in Vietnam from Global Experience This analysis provides an overview of cryptocurrency regulations worldwide, particularly in the European Union, the United States, and Singapore, while proposing a regulatory framework for ...