A customer pays for goods through a QR code. The issuance of digital currency could also help accelerate Vietnam's digital economy development. (Photo: VNA) Hanoi (VNS/VNA) - Vietnam is playing catch-up in a global race to develop itsown digital currency and experts believe this will not only help the countrydevelop new technology but also present an opportunity for Vietnam to jointhe most technologically-advanced countries.
The Prime Minister last month endorsed the strategy for developing e-Governmenttowards digital Government in the 2021-25 period. In Decision 942/QĐ-TTg issuedon June 15, the State Bank of Vietnam (SBV) is assigned to research the pilotuse of 'virtual money' based on blockchain technology in the next threeyears.
This is a remarkable change in the Government’s policymaking given the realitythat Việt Nam has not yet recognised cryptocurrencies. So far, the central bankhas repeatedly emphasised that owning and trading Bitcoin and othercryptocurrencies is risky for investors as these coins are not protected by law.
Virtual currency is a new concept in Vietnam. There are many different andconfusing names in the market such as virtual money, electronic money, digitalcurrency and cryptocurrency.
According to Investopedia, digital currencies can be considered a superset ofvirtual currencies and cryptocurrencies. Digital currencies can be regulated orunregulated currency that is available only in digital or electronic form. Ifissued by a central bank of a country in a regulated form, it is called theCentral Bank Digital Currency (CBDC).
If existing in an unregulated form, it should be called virtual currency andmay be under control of the currency developers instead of a centralisedregulator. Cryptocurrencies are also an example of this type. Bitcoin andethereum are the most popular cryptocurrencies.
To date, Vietnam’s law has no specific definition of virtual currency andvirtual assets. Current regulations only refer to the concept of electronicmoney (e-money) which is pegged to a fiat currency and exists in the form ofpre-paid bank cards, e-wallets or mobile money.
SBV has repeatedly affirmed Bitcoin and other virtual currencies are notelectronic money and cannot perform the function of a legal currency as a meansof payment. Currently, SBV, the Ministry of Justice and the Ministry of Finance(MoF) are studying the legal basis for managing virtual currency and virtualassets. MoF has also set up a research group on this issue.
While most experts agreed the central bank should clarify the concept ofvirtual money in latest Decision 942, finance specialist Nguyen Tri Hieu saidthe “virtual” word can lead to negative thinking as it has been associated withfraudulent projects spreading in the media.
“I think the central bank may use the concept of digital currency orcryptocurrency to reflect the intrinsic value of this form of money,” Hieu said.
More than 60 central banks across the world are exploring and activelydeveloping their own digital currencies to modernise financial systems aswell as counter a possible threat from cryptocurrencies, according to PwC.
Last year, The Bahamas became the first country to launch a central bankdigital currency (CBDC) nationwide.
Among major monetary authorities, China is the front-runner in the global raceto launch CBDC and is testing a digital yuan, or e-CNY, in several cities.Meanwhile, the European Central Bank is planning to introduce a digital eurowithin the next five years. The United States lags behind in its own researchbut the US Federal Reserve has said it is more important to get its approachright rather than leading the pack.
In Vietnam, SBV seemed to be hesitant in building a legal framework for digitalcurrency. Last year, SBV proposed a pilot regulatory sandbox for fintechcompanies but did not mention digital currency.
“Vietnam is relatively slow in starting to research digital currency but it’salso not too late. Digital currency is an inevitable trend for a digitalfuture,” Hieu said.
While major currencies of the US, EU and Japan have had great influence in theglobal currency basket and international trade. Hieu said issuing digitalcurrency of small countries like Vietnam would lift its position in the newglobal financial system which will be reshaped in the future with the rapiddevelopment of technology.
“The world is entering the digital economy era. Along with the developmentof Industry 4.0, AI, 5G, this is a challenge for Vietnam but also anopportunity to rise in the ranks of advanced countries with the most developedtechnology,” Hieu said.
Huynh Phuoc Nghia, Deputy Director of the Institute of Innovation (Universityof Economics HCM City), also said in many issued policies, Vietnam hasidentified technology as key for future development. This policy is backed bythe strong development of e-commerce and online payments.
“The rate of non-cash payments is on the rise in Vietnam. The issuance ofdigital currency could also help accelerate this process,” Nghia was quoted assaying on thanhnien.vn.
Vietnamese people are predicted to be ready to accept digital money. Vietnamranked second in terms of crytocurrency use among 74 surveyed economies byStatista in 2020.
In Decision 942, the Government also focuses on prioritising research anddevelopment of some core technologies in which Vietnam has advantages such asQR codes, artificial intelligence (AI), blockchain, virtual/augmented reality(VR/AR) and Big Data, facilitating deployment of digital Government.
“However, this is also a big challenge for the SBV as this is an infant and newmarket and there is no real experience in the world to refer to,” Hieu said,noting new issues such as concepts, how to store digital money and put it incirculation, building electronic systems, national networks and ensuringinformation security all need to be developed comprehensively./.
VNA
