After previous reports of Vietnamese government proposing to legalize Bitcoin payments, the country backflipped almost overnight with the central bank proposing a ban on all Bitcoin payments. The stance by the State Bank of Vietnam seems to have remained unchanged from their original stance in 2014 where they issued a warning to financial institutions offering cryptocurrencies.
According to the State Bank of Vietnam,
“The issuance, supply, [and] use of bitcoin and other similar virtual currencies as a means of payment is a prohibited activity in Vietnam. Under the provisions of Clause 6, Article 27 of Decree No. 96/2014 / ND-CP on administrative sanctions in monetary and banking activities, acts of distributing, including Bitcoin and other similar virtual currencies, will be fined fines from 150 million to 200 million [VND].”
The use of Bitcoin and other similar virtual currencies will result in a fine equal to approximately $6600 USD to $8800. While holding Bitcoin itself is permitted, the use of Bitcoin as an alternative payment to the Vietnamese Dong is not permitted. Looking more deeply into the State Bank’s comment, lawyer Le Cao stated,
“If bitcoin is accepted it will be difficult to control: tax evasion, illegal transfers, payments, financing of illegal transactions will arise and thus state management of money, the economy will become very complex.”
Prior to the announcement, a prominent university in Vietnam named FPT University began accepting payments in Bitcoin for tuition for all foreign students. Now the University will be forced to backtrack these plans and foreigners will be forced to convert their native currency to the Vietnamese Wong.
Investment or Payment?
Although Bitcoin is still considered legal as an investment instrument but illegal for payments in Vietnam, the current framework is still very murky. Just like the US Dollars can be is used for investing (speculating on its value relative to other fiat currencies) and payments, the point at which one transaction of Bitcoin goes from a payment to an investment is unclear, and vice versa. This arrangement is however perfect for authoritarian governments, as the authorities can pick and choose which transactions are payments, and which are investments. This announcement may have two effects: first, users may move their Bitcoins into more private coins like Zcash or Monero and second, they may liquidate all their Bitcoin holdings.
The End of Bitcoin in Vietnam?
The most recent news may signal the end of Bitcoin in Vietnam, however, the current author does not think so. Prior to the announcement, there have been reports stating that the current prime minister, Nguyen Xuan Phuc has asked the State Bank, as well as, Ministry of Finance and the Ministry of Public Safety to create a legal framework for cryptocurrencies with the intention to legalize them as a payment. While the State Bank officially banned cryptocurrencies as a payment, this may well be a temporary measure before the full regulatory framework is fully rolled out in 2018.
Another saving grace is the status of Vietnamese exchanges, like VBTC and Vietnam Bitcoin. These exchanges are still fully unregulated.
Bitcoin in Southeast Asia
As like the rest of the world, Bitcoin has surprised governments and most of Southeast Asia is still figuring out where it stands.
Malaysia seems to be the next country to decide it’s fate with the Bank Negara Malaysia deciding before the end of the year. Indonesia’s fate may be sealed, with the Governor of Bank Indonesia stating, “I must emphasize that BI [Bank Indonesia] does not see Bitcoin as an official payment tool in Indonesia so all people should know not to use Bitcoin as a means of payment.” This, on top of two payment processors, Toko Bitcoin and Bitbayer, being shut down in the country; the writing may be on the wall.
Singapore, as you would expect with its history of free markets, is showing signs of no regulation at all with Ravi Menon, Managing Director of the Monetary Authority of Singapore stating:
“We’ve taken the approach that the currency itself does not pose the risk that warrants regulation. Our approach is to look at the activity around the cryptocurrency and then make an assessment of what regulation would be suitable.”
Lastly, the Philippines seems to be following Japan and Singapore, with regulations put in place for Bitcoin exchanges and the currency still considered legal. The Bangko Sentral ng Pilipinas stated earlier this year:
“recognizes that virtual currency systems have the potential to revolutionize the delivery of financial services particularly for payments and remittance, in view of their ability to provide faster and more economical transfer of funds, both domestic and international, and may further support financial inclusion.”
Like Singapore, the Philippines is turning into a critical region as popularity for the virtual currency recently exploded in popularity.