Vietnam to pilot virtual currency as crypto thrives in gray zone

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HO CHI MINH CITY – After years of warning its citizens not to “gamble” on virtual money, the Vietnamese government has decided to explore creating its own digital currency.

The surprise policy move came buried near the bottom of Prime Minister Decision 942, which lays out a strategy for digitizing the government by 2030. Released last month, it directs the State Bank of Vietnam to research, “develop, and pilot the use of virtual currency based on blockchain technology.”

The move comes amid a wide-ranging crackdown on private cryptocurrencies elsewhere, from a China clampdown that sent bitcoin prices plummeting last month, to a ban on the Binance trading platform by the U.K. and warnings from other countries.

In Vietnam, using cryptocurrencies to make purchases is illegal, but they are still actively bought as investment instruments – the country is in the top three globally in percentage of people saying they hold some form of crypto asset, according to a survey by Statista. Shops also have sprouted up around Ho Chi Minh City using “bitcoin” in their names or offering to accept the currency as a way to attract customers.

Hanoi’s foray into digital money does not mean it will soon replace the country’s magenta-and-blue bank notes. Nor does it presage a friendly stance toward speculators by the government. As recently as March, the state bank was reminding people that crypto is not legal tender.

A cafe in Ho Chi Minh City cashes in on the cryptocurrency craze with its logo design. (Photo by Lien Hoang) © Lien Hoang

What the blockchain pilot program does seem to indicate is that the state has decided it cannot ignore the cryptocurrency mining and trading frenzy that has taken off during the coronavirus pandemic as people out of work or stuck at home seek new sources of income.

Instead, experts say, the government is looking at ways to regulate the new technology.

Binh Nguyen Thanh, coordinator at RMIT University Vietnam’s FinTech-Crypto Hub, said Decision 942 opens the door to the possible creation of a central bank digital currency, which would allow authorities to control virtual money rather than leave it to decentralized software and private enterprise.

“I think they will look at how the experiment in other countries goes,” Thanh told Nikkei Asia. Cambodia launched a state-backed digital coin, while neighbors from China to Thailand are debating similar action.

He expects Vietnam will form a task force of different agencies, from the state bank to the justice ministry, to collect information about blockchain and central bank digital currencies. The government has been planning a fintech regulatory sandbox – a controlled environment for testing new technologies – and a digital currency pilot could be added to that, Thanh said.

Decision 942, he was careful to note, does not legalize cryptocurrency trading.

Nevertheless, it remains popular, according to Lynn Hoang, Vietnam director of Binance, the world’s biggest crypto exchange.

She said in April the country was in the top 10 of those using her company’s marketplace.

“Users in Vietnam, they’re willing to try new things,” she said in an interview, adding: “We work with regulators. So far we don’t see any problems in Vietnam.”

The cryptocurrency market remains in a gray area and is hard to regulate, Thanh said. But the Southeast Asian country is unequivocal that fiat money is the only legal money.

The state bank’s missive in March included warnings that people dabbling in crypto risk falling prey to pyramid schemes, criminal use of virtual money and trading volatility.

“The use of bitcoin as a means of payment in Vietnam is a violation of the law,” it said, “and may be subject to administrative or criminal sanctions.”

Top Cryptocurrency News On July 12: Major Stories On Bitcoin, Binance And NFTs

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In Focus

Binance froze when Bitcoin crashed. Now users want their money back

Binance, the world’s largest cryptocurrency exchange, froze for over an hour just as the price of Bitcoin and other cryptocurrencies plunged. Users, who had made leveraged bets on their rise, were locked out. As losses steepened, the exchange seized their margin collateral and liquidated their holdings. Binance traders around the world have been trying to get their money back. But unlike a more traditional investment platform, Binance is largely unregulated and has no headquarters, making it difficult, the traders say, to figure out whom to petition. Now a group of about 700 traders are working with a lawyer in France to recoup their losses. In Italy, another group is petitioning Binance over the same issue. A Binance spokesman said extreme market volatility, like on May 19, can create technical bottlenecks for it and other exchanges. Read more here

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As Bitcoin and other cryptocurrencies have been garnering attention in India, the focus has turned to blockchain. Blockchain in the country is making inroads at a swifter pace than before and is gaining a lot of curiosity on ways it can make companies more efficient and their transactions safe.

This has led blockchain companies to constantly reinvent the wheel to see how technology can be applied optimally, coming up with new and innovative ways to help firms reduce costs, enhance processes, customer data tracking, and security, ensure product safety and deal with fraud and counterfeiting.

Blockchain is being looked at by both big and small businesses to streamline their operations. The pandemic has led to a huge shift to digital platforms, making blockchain more relevant to ensure safe and transparent transactions. Though the technology is still in the nascent phase in India, its potential across the board is enormous.

Here are the 5 top trends-

BaaS – Blockchain-as-a-Service: Blockchain-as-a-service (BaaS) is the third-party creation and management of cloud-based networks for companies in the business of building blockchain applications. BaaS is based on the software as a service (SaaS) model and allows customers to leverage cloud-based solutions to build, host, and operate their own blockchain apps and related functions on the blockchain. BaaS help the customers in a faster application development, low maintenance cost and fast adoption of Blockchain technologies.

VC & SSI – Verifiable Credential & Self Sovereign Identity (Universal Identity): Self-Sovereign Identity (SSI) offers verifiable, globally resolvable, and privacy-preserving credentials that we store and manage from the security of our own devices and can show it to anyone, anywhere. It can be used for industry that can be used for personal identification purposes. e.g. claim benefits, bank account, loan, insurance, healthcare services etc.

DeFi – Decentralized Finance: Decentralized finance (DeFi) is shifting from traditional centralized financial systems such as brokerages, exchanges, or banks, and instead utilizes smart contracts on blockchains.

NFT – Non-Fungible Tokens: A NFT (non-fungible token) is a special cryptographically-generated token that uses blockchain technology to link with a unique digital asset that cannot be replicated. NFT digital content represented as tokens which ascribe provenance to uniquely distinguishable assets by artist, gaming companies, content creators, is driving a new wave of crypto adoption. One recent report by market insights on NFTs, says that in 2020, NFT trading was worth over $250 million.

CBDC – Central Bank Digital Currency: A Central Bank Digital Currency (CBDCs) is a digital form of central bank money based on Blockchain, which is a legal tender created and backed by a central bank. Many CBDC pilot projects are going on across the globe. The Indian government has released its National Blockchain Strategy in Jan 2021 and is also introducing a bill to launch its own digital currency.

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