What challenges for issuing gold certificates in Vietnam?

It is believed that the public now has around 400 tons of gold. If this gold remains in each person or family's private "treasury," it will be a complete waste, as gold is a precious asset that can be utilized to grow the country and serve national and public interests. As a result, Mr. Hieu feels it is important to bring this quantity of gold into the economy.

Previously, restrictions permitting banks to mobilize and lend gold put the economy at risk of "goldization," which may collapse the financial system. When gold becomes an essential element of financial transactions and savings, interest in the national currency falls, which has a detrimental impact on monetary policy and macroeconomic management. This highlights the need for regulatory changes to preserve economic stability, reduce risks, and promote effective use of financial resources.

Mr. Hieu suggests a way to maximize gold mobilization and usage in the economy by issuing gold certificates through the SBV. This method enables the SBV to voluntarily solicit gold from the public and then issue gold certificates with adjustable maturities ranging from 3 to 6 months or 1 to 5 years (a model similar to the one successfully adopted in India).

This not only allows gold depositors to make profits through interest rates (although not as high as bank deposits), but it also assures that gold may be converted into cash at any moment. This strategy serves to mobilize idle gold resources in the population for commercial and economic growth activities, encouraging economic growth while reducing the danger of goldization.

Furthermore, we may use the commercial banking system to increase the size and breadth of gold certificate issuances. This entails leveraging the commercial banking network as a distribution channel under the guarantee of the SBV, making it easier for the public to deposit and redeem gold, hence maximizing mobilization.

Using this strategy, the SBV can raise a huge amount of gold for the government and the Ministry of Finance to borrow. The Ministry of Finance can then utilize gold as security to borrow money from international institutions at advantageous interest rates, allowing us to convert gold into foreign currency for commercial and national purposes.

Importantly, the government's proposal to establish a national gold exchange is a big step toward developing a transparent, efficient, and professional gold market in Vietnam. This exchange will serve as a platform for the mass dissemination of pricing data and gold trading activities, making it easier for investors and traders to enter and participate in the market.

The existence of a well-managed, transparent gold market will encourage the participation of gold traders, facilitating the efficient mobilization and use of gold resources in the economy. By providing accurate and timely gold price data, it also supports the government and the SBV in making appropriate and timely policy decisions.

When the SBV mobilizes gold and loans it to the Ministry of Finance, it receives interest, which it pays to depositors. Meanwhile, the Ministry of Finance utilizes this collateral to borrow from overseas, so promoting economic development and earning large tax revenues. As a result, we don't have to worry about the expenditures related with interest payments. According to Mr. Hieu, the bulk of gold is not disseminated but remains within Vietnamese territory; nonetheless, what is significant is the mobilization of gold.

The central bank is the most reputable body in an economy, particularly when it comes to money. As a result, if the SBV of Vietnam mobilizes gold and issues gold certificates in its name, the credibility will be quite high. However, the problem is determining which sort of gold the SBV mobilizes in order to enforce rigorous standards based on audited or verified criteria. All gold kinds that do not satisfy the criteria will be rejected, and when the SBV returns gold to depositors, it must adhere to the gold standards received. This technological procedure will be fairly complicated since it necessitates the creation of units to verify gold purity.