Vietnam is in the process of preparing a regulatory framework for bitcoin and other cryptocurrencies. Rumor has it that the first draft will be released shortly, possibly this weekend. Major players are positioning themselves to enter one of the biggest markets for cryptos in Asia. Let's take a look at the current situation and at what could potentially be – the dawn of a new era.
Plan to regulate
Last year in August the Prime Minister of Vietnam issued a decision to create a legal framework for virtual assets. The country's Ministry of Justice is in charge of coordinating with other relevant authorities. I have met with the Minister to comment on international experiences. The plan is to have a cryptocurrency bill by the end of the year. Not much time, but they have a dedicated team working on this.
An official of the State Bank of Vietnam (SBV) recently announced that it will likely have a regulatory sandbox for fintech, also within 2018. Together with one of our blockchain clients, we had advocated for a blockchain sandbox as a first step for a year and a half. So, the outlook is generally positive. Although, we don't know the details of the planned regulations yet, and delays are common in Vietnam.
As it currently stands, Vietnam's laws are hostile to cryptocurrencies. Issuing, providing and using bitcoin or other virtual currencies as payment method is prohibited in Vietnam, because cryptocurrencies are not listed in an SBV decree as one of the permitted non-cash payment methods. Vietnam also has strict capital controls and foreign exchange regulations. Offshore investments by Vietnam residents require licensing in Vietnam.
ICO and STOs are not regulated, although, the State Securities Commission notified securities companies, broker-dealers etc. to not get involved, pending new regulations. Significant fraud is being reported in connection with fake ICOs. Likewise, the SBV has directed financial institutions and intermediaries under its purview not to deal with any virtual currencies and related companies.
Data privacy and other issues are not yet in the mainstream, but Vietnam has passed a new Cybersecurity Law that will come into effect in January 2019. It requires server localization and commercial presences for IT services provided in Vietnam.
The upside: R&D hub
Despite the difficult legal landscape, many in the industry say that Vietnam is great for blockchain technology R&D. Vietnam has many talented engineers eager to learn and strong tax incentives for high-tech companies. Intel, Samsung and others have major production hubs here.
Vietnam has the potential to become the next blockchain hub. A number of larger blockchain R&D companies and projects have already sprung up here. The State is welcoming high-tech and is eager to prepare for the Fourth Industrial Revolution. Telegram groups on blockchain topics are active, and international projects are visiting to pitch on a daily basis. A conducive, practical legal framework for crypto assets could further ignite the boom.
Vietnam's ministries and other law-drafting bodies are often soliciting opinions from business and other stakeholders on new draft legislation. This is a great way to be involved in shaping upcoming laws. We expect that this will be true for the draft crypto-asset regulations as well, but time is very limited. Stakeholders should get ready to submit their comments on short notice – possibly within a few days.
We can help you understand the implications of upcoming regulations. We would be happy to collaborate and prepare comments to be submitted to the relevant authorities. We can assist in Vietnamese, English, Japanese, French and other languages.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.