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Virtual currency: a new game for Vietnam

It is likely that the piloting of virtual currency will be the second sandbox in Vietnam after Mobile Money to offer the market a new and convenient means of payment in the digital economy.




Bei Erhuang, a 28-year-old woman in Shenzhen, China, was given 200 e-CNY (cryptocurrency) transferred to an e-wallet account. She went to a convenience store near her house to buy some milk and fruit and paid for the items by showing up her phone with a QR code. The seller scanned the payment code and 48 e-CNY was deducted from her e-wallet.

“Everything is quite simple, although it is still not very fast,” she said.

Shenzhen, Shanghai and Beijing are the cities selected to pilot the use of e-CNY, or digital renminbi, developed by the Central Bank of China in 2014 and approved for development by the Chinese Parliament in 2017.

But since the widespread trial use of this cryptocurrency in April, the reaction of the Chinese people to the e-CNY has been indifferent even though the country has almost eliminated other virtual currencies such as Bitcoin and Ethereum from the market.

China's great ambition behind the e-CNY is facing a very difficult challenge, similar to what central banks around the world will face: how to encourage people to switch to the State's digital currency?

China's ambitions behind the e-CNY

Bitcoin builds trust among users around the world thanks to a series of technologies that are described to be transparent, and authenticated on blockchains... Bitcoin also does not belong to any central bank.

The value of this virtual currency lies in the belief in the limited reserve of 21 million coins, automatically halving the mining reward for every 210,000 blocks, and automatically adjusting the mining difficulty for every 2,016 blocks.

In response, central banks around the world cannot sit idly and watch their role in regulating the economy at stake. The Central Bank of China has been researching its cryptocurrency, followed by the central banks of Sweden, Uruguay, the UK and the EU.

To date, China has allocated 200 million e-CNY as a bonus to people participating in the trial use. Meanwhile, foreigners can buy e-CNY through the topup services (a form of recharge to prepaid accounts) of mobile carriers when traveling in China.

China has asked popular e-wallets like WeChat Pay or Alipay to use e-CNY and goods and service providers to accept payments in e-CNY.

Beijing has initially created trust and changed people's shopping habits. But China's ambitions go beyond that.

The renminbi accounts for only 1-2% of global foreign exchange market turnover, global payments and foreign exchange reserves, compared to 44%, 46% and 62% respectively for the US dollar. China wants to adopt the e-CNY to break the dominance of the US dollar.

The first basis is the local market of 1.41 billion people, which China uses to pressure the private sector to switch to yuan if it wants to penetrate this huge consumer market.

In addition, when inviting international organizations and neighboring countries to join the network built by the Central Bank of China, people in countries can easily exchange digital currencies based on the exchange rate set by the market, such as 1 e-CNY for 7 e-Pesos.

Further, China's aim is to use e-CNY to curb inflation, fight corruption, money laundering, and tax evasion, while reducing costs related to printing, issuance, and preservation of banknotes.

Vietnam begins to research virtual currency

According to the Prime Minister's recently issued decision on the e-government development strategy towards digital government in the 2021-2025 period, the "research, construction and piloting of virtual currency based on Blockchain technology" will be carried out.

Under this decision, the research, development and mastering of core technologies are assigned to the Ministry of Information and Communications, the State Bank of Vietnam, the Ministry of Science and Technology and a number of other ministries, agencies and localities. In particular, the State Bank of Vietnam is tasked to lead the research, construction and pilot use of virtual money based on blockchain technology in the period of 2021 - 2023.

Currently, Vietnam does not have a specific definition of virtual currency and virtual assets. The State Bank of Vietnam still affirms that Bitcoin and other virtual currencies are not electronic money at all and cannot perform the function of legal currency in Vietnam.

In theory, the virtual currency piloted by the State Bank of Vietnam can replace the current paper money. Instead of printing paper money, the State Bank issues a certain amount of virtual money based on Blockchain technology for circulation in the economy.

Therefore, to be able to pilot virtual currency, there will be many issues to be solved, such as safety and security and whether or not this currency can be controlled, as well as anti-money laundering when virtual currencies can be used across borders and can be exploited by criminal gangs.

It is likely that the piloting of virtual currency will be the second sandbox in Vietnam after Mobile Money to offer the market a new and convenient means of payment in the digital economy.

Huu Phuong

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