The Vietnamese government is carrying out a project to complete the legal framework for managing and handling digital assets, virtual currency and digital money.

As bitcoin has resulted in many civil disputes, commercial disputes and criminal acts, the Vietnamese government now believes virtual currency needs to be managed and supervised.

Together with the State Bank of Vietnam (SBV), the Ministry of Industry and Trade (MoIT), the Ministry of Information and Communication (MIC) and the Ministry of Justice (MoJ) will review the current legal framework about digital assets, virtual currency and digital money before December 2017.

Three decrees about digital assets, virtual currency and digital money are to be proposed to the government in 2018. Tax payment method and criminal fines for related violations in regard to these transactions will also be proposed at the same time.

Due to a lack of lawful regulations to adjust virtual currency and digital money, the managing tasks for those transactions have faced a number of difficulties and caused budget losses, and has become a tool for tax evasion, money laundering and weapons sales.

Vietnam is examining an increase in investment and businesses transactions with digital money, and the scale is escalating from big cities to northern border provinces, Central provinces and the Central Highlands.

Digital currency pyramid scheme are attracting many investors but a lack of understanding about digital currency causes investors to bear huge risks while participating, according to the project. More importantly, virtual currency and digital money might result in foreign currency bleeding and create instabilities in the financial realm and money markets.

Bitcoin, with a world-wide market capitalization of more than $12 billion, is among other virtual currencies that have not been lawfully approved and protected in Vietnam as well as many other countries.

The central bank has been warning organizations and individuals to not hold, invest or execute any transaction involving bitcoin or any other similar virtual currencies because possession, trading and utilization of bitcoin and similar virtual currencies as assets pose risks and are not lawfully recognized nor protected.

“Vietnam will learn how to manage digital transactions from the experiences of other countries, including the US, the EU and Japan”, the project notes. Together with the addition of digital assets, virtual currency and digital money into the legal framework, the government emphasizes the need to adjust and amend the current legislation.

There are five managing methods for digital money including warnings, regulations for digital money authorities in order to protect consumers, additional notes to current law, overall regulations and prohibition.

Digital money incurs a risk that is different than other payment and saving methods, which is the continual fluctuation of the conversion rate between digital money and other currencies. Moreover, small transaction caused the liquidity of digital money to be limited; making a large transaction could have a big impact on the valuation of digital money.

Bitcoin has surged from $13.28 at the start of 2013 to $762.13 as of 5 p.m. Hanoi time on December 4. There are two virtual currency exchanges that started in Vietnam in 2014 including the Ho Chi Minh City-based VBTC Vietnam Ltd, which operates an exchange that trades bitcoin for the local currency and Bitcoin Vietnam Company. Both of their operations have been scrutinized by local authorities and the police, though their operations have not been hindered.

VN Economic Times