Legal framework needed to better manage cryptocurrency market

A delay in issuing official legal regulations on managing cryptocurrencies will cause a rise in the risks of fraud and theft related to virtual assets, experts have warned.

Recently, investment in cryptocurrencies such as Bitcoin, Pi Network, Ripple, Bitcoin Cash and Litecoin has increased in Vietnam. It is estimated 1 million Vietnamese are already trading cryptocurrencies and the number is expected to increase 30 times by 2030.

At present, Vietnamese law does not mention cryptocurrencies as a legal means of payment, and neither does it recognise them as an asset or a foreign currency. Possessing, trading, and investing in cryptocurrencies therefore is not legal in Vietnam.

Finance expert Nguyen Tri Hieu told Vietnam News there are currently no regulations about the issuance, trading and exchange of virtual assets and cryptocurrencies nor regulations on an agency to manage virtual assets. Thus, the trading and exchange of cryptocurrencies via international platforms such as Binance, Coinbase Okex, Houbi, Bittrex, Remitano, Santienao and Kenniex or through direct agreements carry a lot of risks.

It was very easy for those who buy and sell virtual currencies online to become victims of scammers, Hieu said, warning that the investors would not be protected by law.

Management agencies and experts have repeatedly warned investors over cryptocurrencies. Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu said under current regulations, Bitcoin and other similar virtual currencies were not legal means of payment in Vietnam. 

The Ministry of Finance (MoF) said the trading and exchange of cryptocurrencies via platforms such as Binance and Coinbase or through direct agreements carry a lot of risks.

The State Securities Commission last month advised people to be cautious when investing in virtual assets and currencies while asking public companies, securities companies, fund management companies and investment funds not to conduct the illegal issuance, trading or brokerage of virtual currencies.

Despite the warnings, investors still flock to cryptocurrency due to the offers of high profits. Therefore, experts have urged the Government to rapidly fill the legal gap in cryptocurrency management to minimise the drawbacks arising the investment channel.

According to lawyer Nguyen Thanh Ha, Chairman of SBLAWS Law Firm, there is a huge legal gap in cryptocurrency management. Currently, the SBV is the only management agency to have issued a written document confirming digital currency is not an accepted payment instrument in Vietnam while some other agencies such as the MoF and the Ministry of Public Security have just warned of the risks when investing in cryptocurrencies.

It was very difficult to handle issues that might arise when investors trade cryptocurrency as there are no official legal prohibitions or guidelines related to this type of asset, Ha said.

Expert Can Van Luc said management agencies should research and create a legal framework for official digital currencies and business models in the new electronic financial environment such as e-wallets and fintech.

At the same time, it was necessary to complete the national identity database with a focus on upgrading information technology infrastructure and network security to protect the interests of consumers and financial institutions, Luc said.

Currently, ministries and agencies including the SBV, the MoF and the Ministry of Justice are working to implement the Prime Minister’s Decision No1255/QD-TTg on the project of completing the legal framework to manage virtual assets, digital currencies and cryptocurrencies.

The MoF has set up a research group, which began an in-depth study of cryptocurrencies, aiming towards legislative reform for the industry in the near term. The group is studying laws already enacted by the US, the EU and Japan related to the issue.

Before the issuance of asset-related legal regulations, the ministry will continue to raise people's awareness about virtual assets and cryptocurrencies as well as warn about their risks.

The central bank also directs credit institutions and payment intermediaries to regularly warn users about the trading and use of such assets.

According to experts, the issue of legal regulations on managing virtual assets and cryptocurrencies might have long-term public, social and economic benefits as the trading of the assets without legal regulations as done currently can cause losses of State budget revenue, foreign currency shortage, or cross-border money laundering.

According to experts, cryptocurrency management will provide an opportunity for Vietnam to make additional revenue by taxing cryptocurrency trading. By defining them as exchanges of foreign currencies or financial assets, such exchanges, previously tax-free, may fall within the scope of corporate or personal income tax.

In addition, regulating cryptocurrencies in the country should effectively fight fraud and abuses related to virtual currencies, such as money laundering, hacking, or the anonymous financing of illegal activities.