A customer uses a Bitcoin ATM in HCM City (Photo: tuoitre.vn)Hanoi (VNS/VNA) - The use of cryptocurrency and blockchains in Vietnamis currently limited to just one percent of the total population, thoughexperts anticipate that the number could grow to 30 million users in the nextten years.
Nonetheless, the State Bank of Vietnam (SBV) has clearly stated that unlikelegal tenders, cryptocurrencies such as bitcoin are not considered real moneyand thus not recognised as payment methods in Vietnamese law.
Bitcoin was first introduced to Vienam in 2009, and has since experienceddouble-digit growth each year in terms of users, and an average dailytransaction value reaching the thousands of US dollar, according to BitcoinVietnam Co Ltd., the self-proclaimed first bitcoin platform in the country,established in 2014.
Subsequently, bitcoin’s blockchain, its own open, distributedledger that records transactions between two parties using the coin in averifiable and permanent way, is now also accessible in Vietnam.
Nonetheless, the State Bank of Vietnam (SBV) has clearly stated that unlikelegal tenders, cryptocurrencies such as bitcoin are not considered real moneyand thus not recognised as payment methods in Vietnamese law.
Bitcoin was first introduced to Vienam in 2009, and has since experienceddouble-digit growth each year in terms of users, and an average dailytransaction value reaching the thousands of US dollar, according to BitcoinVietnam Co Ltd., the self-proclaimed first bitcoin platform in the country,established in 2014.
Subsequently, bitcoin’s blockchain, its own open, distributedledger that records transactions between two parties using the coin in averifiable and permanent way, is now also accessible in Vietnam.
[Experts worry over e-money’s red-hot growth]
As of late August this year, Prime Minister Nguyen Xuan Phuc had orderedrelevant agencies to draft a legal framework for cryptocurrency and otherdigital assets, which could mean that bitcoin and its like will be one day acceptedin Vietnam under appropriate management.Nevertheless, at the moment, the issue has a number of loose ends, as the SBVstill finds digital currency hard to control. Since bitcoin is a decentraliseddigital currency, its payment and control system works without a centraladministrator, so it poses latent administrative risks to the SBV in particularand central banks in general.
Back in July, the SBV sent out a document clearly stating its non-involvementin managing bitcoin on the Vietnamese financial market, as this particularcryptocurrency is not a payment method according to the central bank.
This official document also stressed that since bitcoin and litecoin are notlegal tender or legitimate currency, the acts of initial coin offering,generation, and use of such cryptocurrencies as means of payment in place oflegal tender are all prohibited with established sanctions.
The SBV stated that such prohibition is to keep investors safe against thespeculative nature of cryptocurrency, especially when there has been a reportedsurge in the number of bitcoin mining rigs imported to Vietnam, according tothe General Department of Vietnam Customs (GDVC).
In reality, the increase in demand for bitcoin mining rigs has troubled administrativeauthorities, as the GDVC’s list of contraband goods according to Decision187/2013/NĐ-CP does not regulate these machines, which are computers designedspecifically for the decryption of bitcoin and litecoin, through which theprocess of adding transaction records to bitcoin’s blockchain can becompleted, thus generating new coins.
The SBV and the GDVC have reason to believe that the hike in demand for miningrigs is due to a misunderstanding among part of investors, as they mistakenlyconsider the aforementioned draft scheme to be an official recognition ofbitcoin in Vietnam.
As such, new concerns have arisen for Vietnamese authorities. Since bitcoin andsimilar cryptocurrencies are not accepted as legal payment in Vietnam, the mainpurpose of most entities importing these mining rigs is to resell them at ahigher price instead of actually generating new coins.
This would surely lead to a loss for many speculative investors, especiallywhen the lifespan of these rigs is just around two to three months, withreplacements worth more than 3,000 USD.
The SBV has repeatedly warned domestic investors of the systemic risks that lietherein, but seemingly to no avail.
Back in 2009, the exchange rate for bitcoin was about 30 US cents per bitcoin,and it is now roughly 4,000 USD per bitcoin, with a record high of 5,000 USD,stated Ha Ton Vinh, Chairman and CEO of Stellar ManagementCorporation during a September conference on digital cash and blockchain inHanoi.
He commented that the sharp hike in the value of bitcoin is due to investors’speculation, creating hundreds of millionaires in the span of less than adecade while expanding technology and financial application over other economicsectors with about 2 billion USD spent on bitcoin research over the past fiveyears.
In Vietnam, cryptocurrency, or digital cash, is available in popular forms suchas debit or credit cards, or the recently introduced mobile wallets, and inrarer forms such as bitcoin or litecoin, said Terry O’Hearn, Chief ExecutiveOffice at iMozi Canada Inc, at the same conference.
According to O’Hearn, digital currency allows direct transactions through anonline payment device without the need for an intermediate financial entity,thus cutting down transaction costs and increasing convenience.
After reaching up to 4,693 USD per bitcoin on August 29, 2017, the coin’s valuehas been gradually decreasing after China slapped restrictions on initial coinofferings, though there is no sign of speculation letting up.
Commercial bitcoin sites record a total capitalised value of thecryptocurrency’s market of up to 120 billion USD, allowing a staggering returnon investment (ROI) ratio. Any bitcoin investors with enough sway and fundingcan enjoy an ROI of 150 percent in a month, as oppose to the stock market’s 11percent monthly.
As high returns come with equally high risks, the positive nature of thebitcoin market has soon been replaced with grim warnings from experts on theoverblown value of the coin due to too much speculation, which can crash at anymoment, leading to unimaginable devastation on financial markets.
Jean Y. Foo, Founder and CEO of Singaporean Mastermind Crate, pointed out atthe said September conference that the difference between legal tenders such asthe US dollar or Japanese yen and cryptocurrency is that while the former mustbe regulated by a third party during transactions, such as a Central Bank, thelatter simply forgoes this step and relies on technological advances forsecurity.
Therefore, there is no actual guarantee or failsafe mechanism against thecoin’s bubble bursting, should it actually happen. And with the many risks thatbitcoin investors and users must face online such as cyber attacks, theft, orblocked transactions, the SBV cannot guarantee their safety and financialsecurity.
Still, as Vinh suggested, while several countries such as Japan now acceptbitcoin as a legal payment method, it is nonetheless unregulated in themajority of economies including Vietnam and is even heavily restricted inChina. Thus, its definitive status as part of the economy is yet to be decided.-VNA
VNA
