Vietnam joins global peers in digital currency development


Virtual currency is a new concept in Vietnam. There are many different and confusing names in the market such as virtual currency, electronic money, digital currency, and cryptocurrency.

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Vietnam is catching up on a global race to develop its own digital currency and experts believe this will not only help the country develop new technologies, but will also provide an opportunity for Vietnam to reach out to more countries. technologically advanced.

Last month, the Prime Minister approved the strategy to develop e-government towards digital government in the period 2021-25. In decision 942 / QĐ-TTg released on June 15, the State Bank of Vietnam (SBV) is tasked with researching the pilot use of ‘virtual currency’ based on blockchain technology over the next three years.

This is a remarkable change in government policy making given that Vietnam has yet to recognize cryptocurrencies. So far, the central bank has repeatedly pointed out that owning and trading Bitcoin and other cryptocurrencies is risky for investors, as these coins are not protected by law.

Virtual currency is a new concept in Vietnam. There are many different and confusing names in the market such as virtual currency, electronic money, digital currency, and cryptocurrency.

According to Investopedia, digital currencies can be thought of as a superset of virtual currencies and cryptocurrencies. Digital currencies can be regulated or unregulated currencies, available only in digital or electronic form. If it is issued by a central bank of a country in a regulated form, it is called the central bank digital currency (CBDC).

If it exists in an unregulated form, it should be called virtual currency and may be under the control of currency developers instead of a centralized regulator. Cryptocurrencies are also an example of this type. Bitcoin and ethereum are the most popular cryptocurrencies.

To date, Vietnamese law does not have a specific definition of virtual currency and virtual assets. Current regulations only refer to the concept of electronic money (electronic money) which is pegged to fiat money and exists in the form of prepaid bank cards, e-wallets or mobile money.

SBV has repeatedly asserted that Bitcoin and other virtual currencies are not electronic money and cannot perform the function of legal tender as a means of payment. Currently, SBV, the Ministry of Justice and the Ministry of Finance (MoF) are studying the legal basis for managing virtual currency and virtual assets. The MoF has also set up a research group on this issue.

While most experts agreed that the central bank should clarify the concept of virtual currency in the latest 942 ruling, financial specialist Nguyen Tri Hieu said the word “virtual” can lead to negative thinking because it has been associated with fraudulent projects spreading in the media.

“I think the central bank can use the concept of digital currency or cryptocurrency to reflect the intrinsic value of this form of money,” Hieu told Việt Nam News.

Catch up

More than 60 central banks around the world are actively exploring and developing their own digital currencies to modernize financial systems and counter a possible threat from cryptocurrencies, according to PwC.

Last year, the Bahamas became the first country to launch a nationwide central bank digital currency (CBDC).

Among the major monetary authorities, China is leading the global race to launch CBDC and is testing a digital yuan, or e-CNY, in several cities. Meanwhile, the European Central Bank plans to introduce a digital euro within the next five years. The US is lagging behind in its own research, but the US Federal Reserve has said it’s more important to take the right approach rather than leading the pack.

In Vietnam, SBV seemed reluctant to put in place a legal framework for digital currency. Last year, SBV proposed a pilot regulatory sandbox for fintech companies, but did not mention digital currency.

“Vietnam is relatively slow to start researching digital currencies, but it’s not too late either. Digital currency is an inevitable trend for a digital future, ”Hieu said.

While the major currencies of US, EU and Japan have had a great influence on the global currency basket and international trade. Hieu said that issuing digital currency from small countries like Vietnam would enhance its position in the new global financial system which will be reshaped in the future with the rapid development of technology.

“The world is entering the era of the digital economy. With the development of Industry 4.0, AI, 5G, it is a challenge for Vietnam but also an opportunity to rise among the advanced countries endowed with the most developed technology ”, declared Hieu.

Huynh Phuoc Nghia, deputy director of the Innovation Institute (HCM City University of Economics), also said in many published policies, Vietnam has identified technology as the key to future development. This policy is supported by the strong development of e-commerce and online payments.

“The rate of non-cash payments is on the rise in Vietnam. Issuing digital currency could also help speed up this process, ”Nghia told thanhnien.vn.

Vietnamese should be prepared to accept digital money. Vietnam ranked second in terms of cryptocurrency use among the 74 economies surveyed by Statista in 2020.

In Decision 942, the government is also focusing on prioritizing the research and development of certain basic technologies in which Vietnam has advantages such as QR codes, artificial intelligence (AI), blockchain, virtual / augmented reality (VR / AR) and Big Data, facilitating the deployment of digital government.

“However, it is also a big challenge for SBV as it is a nascent and new market and there is no real experience in the world to refer to,” Hieu said, noting new issues such as concepts, how to store and circulate digital money, build electronic systems, national networks and ensure information security all need to be developed holistically.

Source: Vietnam News

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