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SAIGON INSPIRATION FINANCE IS BITCOIN LEGAL IN VIETNAM ?
Can you use virtual currencies for some payments in Vietnam?
Let’s cut past the noise and excitement around Bitcoin to ask a simple question: are cryptocurrencies legal in Vietnam? “From 1-1-2018, the act of issuing, supplying and using illegal means of payment (including Bitcoin and other similar virtual currency) may be subject to prosecution,” a government decree released in October last year stated.
“As such, Bitcoin and other similar virtual currencies [Ethereum, Bitcoin Lite, et al.] are not legal means of payment in Vietnam,” the decree reads.
Leadership at cryptocurrency exchange Bitcoin Vietnam countered in a blog that—in somewhat circular logic—since Bitcoin is not legally defined as a currency, the decree cannot apply. “An illegal means of payment must be (1) a means of payment, and (2) NOT included in the list of approved legal means of payments used by the State Bank of Vietnam,” they wrote (emphasis theirs).
So, since Bitcoin isn’t legally defined as a currency, or a means of payment, it cannot then be defined as an illegal means of payment.
The lexical and intellectual acrobatics may be justified by the cryptocurrency’s startling appreciation. Bitcoin blew past a new record just before December started: US$10,000 per unit of the digital currency.
To put that in context, the Dow Jones industrial average went up 82 percent in its biggest year, 1915—one-tenth of Bitcoin’s growth in 2017.
The digital currency’s growth has come under scattered scrutiny and attempts at regulation by state actors. In October last year, the Chinese government banned residents from trading cryptocurrency, which appears to have had little effect on the stateless fiat currency.
In the same month, the Vietnamese state bank said payment for services in Bitcoin is illegal. The move was a response to clarify local university FTP University’s allowing foreign students to pay with Bitcoin. The decree came with a fine: violating the law will cost between VNV150 million and VND200 million.
Parsing the Facts
So, using bitcoin to pay your tuition as FTP University wanted to do is a no-no. But is trading and mining—offering computing resources to maintain the cryptocurrency’s ledger in exchange for Bitcoin crumbs—okay? The ruling was mute on the issue.
“To the best of our knowledge, Bitcoin has not been made illegal by legislation in most jurisdictions,” the currency’s official website reads. In addition to actions by state actors in Vietnam and China, the Russian leadership has also chosen to speak up about Bitcoin.
“We consider all cryptocurrency derivatives to be a negative development on the Russian market and do not consider it possible to support it, and will even assume measures to restrict potential operations with such instruments,” Russian central bank deputy Sergei Shvetsov said, announcing a ban on non-Russian websites’ sale of Bitcoin.
At the end of November, the Russian central bank issued a report warning investors of “substantial losses” amidst what it judged as a bubble.
At the time of writing, Bitcoin’s market capitalization—the total value of all 16.7 million Bitcoins in the world—stands at over US$160 billion. That’s roughly the size of General Electric, the US-based technology company, and larger than McDonald’s or entertainment company Disney.
SAIGON INSPIRATION FINANCE THE RISE OF CRYPTOCURRENCY IN VIETNAM
More than a million regular cryptocurrency users in Vietnam
As information technology has taken over and replaced traditional brick-and-mortar establishments with mobile phone apps, it was only a matter of time before this evolution started to creep into commodities and more recently, the way we handle money.
About a decade ago, a new form of online technology, called blockchain technology, which increases security and offers a more streamlined approach to transactions, started to gain traction and it didn’t take long before an entirely new alternative to money was born—cryptocurrency.
In 2009, cryptocurrency arrived in Vietnam and the likes of BitCoin, Ethereum, Litecoin, and Ripple started to appear as viable alternatives to cold hard cash. People who were searching for ways to transfer and receive money from overseas bank accounts without the hassle and exorbitant fees were initially the most prevalent users.
At present, there are currently about a million cryptocurrency users in Vietnam with thousands of US Dollars in transactions every day, according to an article from VietnamNews in September 2017.
However, there are a few stumbling blocks with regards to cryptocurrency in Vietnam, most notably, its regulations.
The State Bank of Vietnam officially banned the use of cryptocurrency as a form of payment at the beginning of this year. However, there might be some hope as Prime Minister Nguyen Xuan Phuc has ordered relevant agencies, namely the Ministry of Finance and Ministry of Information & Communications, to look into the possibility of drafting a legal framework for cryptocurrency and digital assets, which is expected to be submitted on August 20. This could give cryptocurrency the push it needs to be accepted as a mainstream form of payment.
Another stumbling block for cryptocurrency in Vietnam, according to figures by research firm Nielsen, in report titled “Mobile Money” which was published in October 2016, is the unwillingness of mobile device owners in Vietnam to resort to mobile banking activities. 53 percent of people surveyed highlighted the barriers they face, such as hard to understand terminology, user interface and a lack of confidence in information security. The rest noted either that they prefer physical banking or that they don’t use the service at all.
Another apprehension for locals is that these cryptocurrency channels do not have any Vietnamese language support. Most of the interfaces are in English, which makes it harder for some Vietnamese with limited English to use the currency.
However, this has not stopped Vietnam from consistently ranking among the top three countries in the world in number of logins to global BitCoin exchanges such as Poloniex and Bittrex.
While cryptocurrency is largely used as an investment tool in Vietnam, its use as a means of payment will only increase once the obstacles are cleared. In due time, it won’t be surprising to see Vietnam established as one of the world’s most active cryptocurrency transaction hubs.
SAIGON INSPIRATION FINANCE VIETNAMESE OR FOREIGN BANK ‒ WHICH IS THE BETTER FOR YOUR BUSINESS ?
Limited choice of banks and services among foreign banks in Vietnam
While foreign banking institutions had branches and representative offices in Vietnam starting in the late ‘80s, much of the landscape consisted of the State Bank of Vietnam (SBV), which originally operated as both a private and commercial bank.
In 1990, the SBV produced four offshoot state-owned commercial banks (SOCBs), each focusing on particular sectors of business: Vietinbank took care of the industrial business, Agribank focused on the agricultural money, international trade was taken on by Vietcombank and infrastructure development was handled by BIDV. If only it were still so simple!
The World’s Banks Beckon
When Vietnam joined the WTO in 2007, foreign credit unions could begin to apply for 100 percent ownership in Vietnam, an attractive prospect for countries like South Korea, which was (and still is) investing billions of dollars in Vietnam every year. As Maxfield Brown, Editorial and Research Specialist at Dezan Shira & Associates told us:
“The big foreign banks that are in the country, they’re primarily focused on the commercial perspective of the biggest investors. They want to make sure that they’re targeting Nike when it comes into the country.”
Right now there are seven foreign banks operating independently in Vietnam:
- – HSBC (Hong Kong)
- – ANZ (Australia)
- – Standard Chartered (UK)
- – Shinhan (Korea)
- – Hong Leong (Korea)
- – Woori Bank (Korea)
- – CIMB (Malaysia)
As more multinational companies enter the market, more foreign banks are vying to be the eighth, Citibank in particular. However, there are many more foreign banks that operate as representative branches – 49, according to the SBV’s website – and they offer most of the same services, depending on your needs.
Foreign banks are definitely a cause for worry for domestic banks, but not as much as you might think. For one thing, local banks know the market better than any foreign bank could, and name recognition goes a long way in Vietnam.
This has prompted some foreign banks to become strategic investors instead of direct competitors. This option is becoming ever more attractive as the investment cap has increased from 15 percent to 20 percent thanks to the recent adoption of Decree 01.
Japan, which has no independent bank in Vietnam but is the second-largest foreign direct investment (FDI) presence, is the best example of this. Brown considers this a long-term plan, and a good one at that:
“Over time the threshold for investments is going to go up, and maybe 10 or 15 years down the line they might own those banks outright.”
But What About You?
So, say you’re opening a business and you’re trying to find the right bank that suits your fledgling company’s needs. You might think that a foreign-owned bank, which has more capital, a better reputation, and international experience than a Vietnamese bank, is the way to go. Well, you’re probably wrong.
It all depends on the needs of your business. If you control a large company with sales overseas, sure, a foreign bank is probably your best bet. They’ll offer you more international coverage and provide easier ways to ship money back to your home base, if it happens to be abroad.
However, if you’re looking to open a small or medium-sized enterprise (SME) in Vietnam, a domestic bank is probably a better choice. As Brown reasons:
“If you don’t need to send your money out of the country all the time, and if you’re perfectly happy growing your business domestically, then Vietnamese banks are going to be much more interested in retaining your business.”
You might receive more attention than you would at a larger, international bank since these banks are often subject to reporting requirements in their home markets that can slow the delivery of key services in Vietnam. Here are Asiamoney’s Cash Management Poll 2016 winners for the top banks for small businesses, both foreign and domestic.
SAIGON INSPIRATION FINANCE VIETNAM’S STOCK MARKET: TIPS TO HELP YOU WIN
Understanding the basics of the Ho Chi Minh City Stock Exchange (HOSE)
Since HOSE (Ho Chi Minh City Stock Exchange) was created in 2007 (an upgrade of the Ho Chi Minh City Securities Trading Centre, created in 2000), Vietnam’s stock market has experienced many changes and developments.
Today HOSE is one of three stock markets in Vietnam, operating alongside Hanoi’s Exchange (HNX) and the Unlisted Public Company Market (UPCoM), a smaller exchange within HNX aimed at companies that don’t have the capital or liquidity to go public on HOSE or HNX.
Currently, Ho Chi Minh Stock Exchange is trading securities products such as stocks, bonds, Closed Fund Certificates, ETF Certificates, and Covered Warrants.
At the end of June 30, 2021, there are 488 listed trading securities products which included: 385 stocks, 02 closed fund certificates, 07 ETF certificates, 65 covered warrants, and 29 bonds. The total amount of listed stocks is more than 103,88 billion stocks. The value of listed capital is more than 5,28 million billion VND, which increased 6,18% due to the previous month and increased 29,52% due to the end of 2020, reaching 8,399% GDP of 2020.
Trading capital on HOSE typically drifts somewhere between $50 and $55 billion at a given time, while HNX stays somewhere around $6 billion. Barry Weisblatt, Research and Analysis Director at Viet Capital Securities Company (VCSC), thinks the difference has to do with reputation: “Institutional investors look at HCMC as the economic hub.”
Vietnam’s daily stock trading value ranks second in ASEAN
The average daily trading value on Vietnam’s stock market has reached more than 30.84 trillion VND (1.34 billion USD) per session so far this year, up 15.9 percent from the last year’s figure and now the second largest in ASEAN, only after Thailand, according to the Ministry of Finance.
When taken in the global context, this is actually pretty minimal. It’ll take more work and development to get HOSE up to the standard of global players like the Stock Exchange of Thailand, which is around $700 billion, but both investors and Vietnam’s government are taking steps to grow HOSE.
The first and most important step? Adding more heavy hitters to the exchange. Not only will more blue chip stocks add capital to the market, but bigger names will also help attract well-heeled investors, foreign as well as domestic.
And this is exactly what has been happening. We’re currently seeing big companies going public – and public companies selling massive amounts of shares – like Novaland (with an initial public offering, or IPO, listed in November 2016), Vietjet, and Vinamilk.
Weisblatt says this is a major step forward, both for HOSE and Vietnam’s economy in general, and a lot of it has to do with bringing new blood into the investment scene. He says that potential investors “love the story in Vietnam – the economy is doing great; there’s the emerging middle class; all the foreign investment; the trade agreements.”
But they’ve also wondered, “What can we invest in?” Right now around 80 to 85 percent of investors in HOSE have been local, but Weisblatt is seeing strong interest from new foreign investors.
Plus, the government has recently made a change that might affect the market more than we know. It’s called Decree No. 60, and it’s getting brokers pretty excited.
Before Decree No. 60, foreign ownership of all publicly listed companies was limited to 49 percent for most stocks and 30 percent for banks. With Decree No. 60, however, companies can now apply to increase their foreign ownership cap to 100 percent.
So far only about 12 companies have increased their limits, but Weisblatt is hoping that more will follow suit. He is optimistic and believes that a whopping $100 billion will be listed by December 2017 – a $30 billion increase from 2016. What will make up this substantial growth? At least part of it will come from foreign investors.
Right now, Vietnam is classified as a Frontier Market by the Morgan Stanley MSCI, a yearly grading system that analyses the growth and effectiveness of global markets.
Many institutional investors are prohibited from investing in Frontier Markets, so the Vietnamese government, as well as brokers, are working hard to move Vietnam to the Emerging Market classification, which would improve its prestige and reputation and attract more globally managed money.
Size and liquidity are factors, sure, but these aren’t the only things Morgan Stanley looks at. HOSE will also need more access to foreigners (Decree No. 60 should help with this) and increased transparency in general.
These developments are all very doable, Weisblatt says, although it may take a few years. Just as important is what going public is doing for Vietnam’s businesses in general. Shareholders are now demanding higher levels of profitability, efficiency, and transparency. With these changes, it looks like shareholders will get their wish.