The Vietnamese fintech sector is on the rise given the government’s activities in facilitating the sector’s growth. The government’s desire to boost the sector, coupled with increased foreign investor interest is accelerating growth in the industry. According to a report by Solidiance, Vietnam’s fintech market hit about $4.4 billion in 2017 and is predicted to reach about $7.8 billion by 2020. Reasons stated for this exponential rise include a growing e-commerce sector, increased e-wallet popularity, rising income, and the government’s activities to develop the sector. The nation’s internet penetration rate hit 52% in 2016, while smartphone ownership accounted for 53% in rural areas and 72% in urban regions.
The country’s economy is also young and savvy with a majority of transactions taking place in cash – a reason why a majority of Vietnam fintech start-ups are focusing on payment solutions. Vietnamese citizens are considered fast adopters of smartphones. There are over 35 million online shoppers in the country. This figure is expected to rise to 42 million by 2021. Therefore, the State Bank of Vietnam established a Fintech Steering Committee back in March 2017 to provide strategies for fintech acceleration in Vietnam. It will also be responsible for proposing a legal framework to facilitate the development of fintech companies.
Legality of Cryptocurrencies in Vietnam
Following an alleged ICO scam in Vietnam that cost 36,000 investors about US $660 million, the Vietnamese government has decided to scrutinize cryptocurrencies closely. Due to this, the State Bank of Vietnam (SBV) issued a statement that affirmed that cryptocurrencies are not legal means of payment in the country. The state of Vietnam only recognizes checks, debit or credit cards, collection orders, payment orders, and any other SBV prescribed payment instrument. All other non-cash payment modes are considered illegal. Anyone caught using, supplying, or issuing any cryptocurrencies may face a fine of between US $6,000 to 9,000.
In January this year, the Vietnamese SCC (State Securities Commission), asked security trading companies to halt all cryptocurrency services such as issuance, brokerage, and transactions. Despite all these regulations, there are no laws that explicitly ban possession of digital currency in the country. This year, however, the Ministry of Finance had proposed a temporary ban on importation of cryptocurrency mining rigs (that was back in June). According to data acquired from Vietnam Customs, last year (2017), over 9,300 mining rigs were imported into the country. As of April of this year, over 6,300 mining rigs have been imported into the country.
Reasons for Cryptocurrency Regulation
The government of Vietnam cites several official reasons for actively banning the use of crypto as a payment method. These reasons include:
- Cryptocurrencies and the crypto-market are not regulated. There is no government supervision, and thereby leaving the industry prone to illegal activities.
- The industry lacks mechanisms set in place for consumer protection. Cryptocurrencies are volatile in nature, which leads to price instability, security concerns, and market manipulation.
- The existence of illegal activities such as tax evasion, money laundering, terrorist funding, and hacking.
- The potential of cryptocurrencies to destabilize existing financial systems which can affect the nation’s economy.
Cryptocurrency Activity in Vietnam
Despite the government’s stance on cryptocurrencies not being legal currencies, this has not deterred the people’s will to acquire them. The data from Vietnam Customs suggests that the fact that around 6,300 mining rigs have been imported into the country clearly shows the people’s stance towards cryptocurrencies. A survey conducted by Infonet found that there are four Bitcoin ATMs in Vietnam that are operating in Ho Chi Minh City. It’s apparent that every day there are visitors, both local and international, making Bitcoin purchases. It’s reported that the number of people who keep making Bitcoin purchases or who buy products using Bitcoin is steadily rising.
There is another BTM located in a coffee shop at the corner of Ly Tu Trong – Cach Mang Thang Tam in district 1. It’s also reported that in some stores where Bitcoin is not accepted as a payment method, there is increased pressure and demand from customers to set up Bitcoin payment facilities. Individuals aren’t the only ones trying to cash in on the cryptocurrency hype. It’s rumored that a high-end jewelry company in Ho Chi Ming City ordered about 100 Bitmain mining rigs worth US $129,000 from China. Being a decentralized market, it seems that the government may not stop its citizens from investing in or using digital currency.
Vietnamese Government Exchange Crackdown
Around May of this year, the Vietnamese government seized Bitcoin Vietnam’s domain over what it cited as operating a blog without a proper license. Bitcoin Vietnam was the country’s oldest cryptocurrency exchange and played an important role in getting Bitcoin off the ground in Vietnam. Apart from having its domain seized, the exchange was hit with a $660 fine for operating an “illegal blog” (yes… a blog), and a further $1,100 fine for allowing its readers to comment on the articles on the blog, which the government called “illegal social networking” (yes… commenting on a blog)… a taste of tyranny. There are rumors that there is some foul play (aka, corruption) at work within the government as some major players are trying to acquire the domain name.
Although the government has banned cryptocurrency as a legal payment method, it may seem that there’s still crypto-activity taking place in the country. While the government’s intention is to stop digital currencies (and blogs, among other things), it seems it may only have succeeded at slowing it down rather than stopping it. A majority of Vietnamese citizens are actively storing and trading cryptocurrencies. Some of them are apparently still mining Bitcoins.
We remain hopeful on the future of cryptocurrencies in Vietnam. Someday, perhaps the government may change its stance on cryptocurrencies and take a proactive approach towards them. We encourage you to learn more about our gold price-backed cryptocurrency, the DinarCoin. More information on the crypto can be found on our official website.