Introduction
What is "cryptocurrency" under Vietnamese legislation?
Is cryptocurrency trading legal in Vietnam?
Are there any risks associated with cryptocurrency trading in Vietnam?
Future developments
Comment
Over the past few years, Vietnam has seen a surge in virtual or digital currency (cryptocurrency) trading activities. While this may be an exciting new playground for investors, from a legal perspective, cryptocurrency trading falls within a grey area where there remains much uncertainty surrounding its legality. No comprehensive regulatory framework exists in this arena, which arguably calls for a higher level of caution from investors who wish to venture into the cryptocurrency trading market.
This article provides an overview of the treatment of cryptocurrency trading under Vietnamese law, the risks investors should be aware of and the legal developments to look out for in this space.
What is "cryptocurrency" under Vietnamese legislation?
Since the emergence of cryptocurrency in 2009, policymakers around the globe have scrutinised its definition but are yet to agree on a generally accepted term. The World Bank classifies "cryptocurrency" as a subset of digital currencies,(1) whereas the International Monetary Fund and the European Central Bank view it as a virtual currency.(2) Due to this disparity, cryptocurrency trading is still considered illegal or unrecognised in many parts of the world.
There is no definition of "cryptocurrency" under the laws of Vietnam. Cryptocurrency has not been recognised as a legitimate means of payment, and nor does it fall within the legal definitions of "property/assets", "goods/services" or "foreign currency". Specifically:
- article 105 of the Civil Code 2015 defines "property" as comprising "objects, money, valuable papers, and property rights. Property comprises immovable property and movable property. Immovable property and movable property may be existing property and property to be formed in the future". Since cryptocurrency is only a digital representation of value, it does not belong to any of these concepts and therefore is not a type of property or asset under Vietnamese law;
- article 3(2) of the Law on Commerce 2005 defines "goods" as "all types of moveable assets, including moveable assets to be formed in the future" and "objects attached to land." As cryptocurrency is not a type of property or asset as mentioned above, it does not fall within this definition either;
- article 1(1) of Decree 80/2016/ND-CP defines "non-cash payment instruments" as including "cheques, payment orders, collection orders, bank cards and other payment instruments as prescribed by the State Bank. Non-cash payment instruments out of this scope are illegal". Applying this definition, since the State Bank of Vietnam (SBV) has not officially recognised cryptocurrency as a legitimate means of non-cash payment, not only does cryptocurrency fall outside the scope of this definition, but it is also illegal to use cryptocurrency as a means of payment in Vietnam; and
- article 6(2) of the Law on the State Bank of Vietnam 2010 defines "foreign exchange" as "currencies of other countries or the common currency of Europe and other common currencies used for international or regional payments". However, as a decentralised system, cryptocurrency is not issued by any central bank, credit institution or e-money institution and thus not a recognised currency of any country. Consequently, cryptocurrency would not be deemed a foreign exchange under Vietnamese law.
Is cryptocurrency trading legal in Vietnam?
In simple terms, cryptocurrency trading involves exchanging one cryptocurrency for another, buying and selling coins and exchanging fiat money into crypto. While cryptocurrency trading is not listed in the system of economic branches of Vietnam under Decision No. 27/2018/QD-TTg, neither is it on the lists of conditional or prohibited business lines under the Law on Investment 2020. Taken together, this arguably shows that Vietnamese laws do not explicitly permit cryptocurrency trading but also do not expressly prohibit this activity either.
However, it should be noted that the SBV has explicitly prohibited all cryptocurrency-related transactions via the banking system pursuant to Directive 02/CT-NHNN dated 13 April 2018. Specifically, with the aim of tackling risks of money laundering, terrorism financing and tax evasion, Directive 02 prohibits credit institutions and providers of intermediary payment services from providing domestic or cross-border payment services, card transactions, money transfer and other cryptocurrency-related transactions.
In addition, illegal card transactions in relation to, among other things, virtual currency or digital currency are further regulated under the SBV's Directive No. 02/CT-NHNN dated 7 January 2021 on enhancing the prevention of bank card-related violations. Specifically, the SBV directed card issuers, card payment organisations and providers of intermediary payment services to, among other things, cooperate with each other to prevent illegal card transactions relating to virtual currency or digital currency.
Are there any risks associated with cryptocurrency trading in Vietnam?
Given the uncertain regulatory environment, cryptocurrency investors and traders face extremely high risks in the event of a dispute as they may not be able to protect their lawful rights.
In addition, it should be noted that the issuance, supply and use of virtual and digital currencies as a means of payment is prohibited in Vietnam. A breach of this regulation may result in the following administrative and criminal penalties:
- a fine of up to 100,000,000 dong (approximately $4,300) for issuing, providing or using illegal payment instruments (article 26(6)(d) of Decree 88/2019/ND-CP); or
- a fine of up to 300,000,000 dong (approximately $12,900) or imprisonment of up to three years for issuing, supplying or using illegal means of payment, or forging or using forged means/vouchers of payment, thereby causing another person a loss of between 100,000,000 dong to 300,000,000 dong (article 206(1)(g) of the Criminal Code 2015 (as amended)).
In the absence of a legal framework, the Vietnamese government has taken action in response to the growing popularity of cryptocurrency trading. For instance, the government has approved an action plan to develop a legal framework on the management of virtual assets, digital currencies and virtual currencies, and set December 2020 as the deadline for the relevant authorities to propose revisions to laws on virtual assets and currencies (Decision No. 1255/QD-TTg dated 21 August 2017). As no regulation has been promulgated to date, it remains to be seen which legislative angle the authorities will adopt in this arena.
In addition to Decision 1255, the prime minister has also issued Directive No. 10/CT-TTg dated 11 April 2018 and subsequently the SBV has issued two directives as mentioned above to tighten the management of bitcoin-related activities and other virtual currencies. The directives play an important role in putting cryptocurrency trading under control and minimising its potential negative impacts on the Vietnamese market.
The regulatory framework for cryptocurrency business and investment remains in the pipeline. All investors and traders should thus be well aware of the potential risks associated with cryptocurrency-related activities in Vietnam and seek legal advice before making any cryptocurrency trading decision.
For further information on this topic please contact Anh Tuan Nguyen at LNT & Partners by telephone (+84 28 3821 2357) or email ([email protected]). The LNT & Partners website can be accessed at www.lntpartners.com.
Endnotes
(1) Houben, R and Snyers, A, "Cryptocurrencies and blockchain: Legal context and implications for financial crime, money laundering and tax evasion", July 2018, 20 & 21.