Virtual assets in Vietnam: a regulatory outlook

Picture source: www.bitbon.space

Virtual assets are a relatively new concept, sporadically being defined worldwide. For instance, virtual assets defined by the Financial Action Task Force (FATF) refer to any digital representation of value (excluding fiat currencies) that can be digitally traded, transferred, or used for payment.

As another example, the Financial Services and Markets Regulations define virtual assets as digital representation of value which can be digitally traded and functions as a medium of exchange and/or a unit of account and/or a store of value without having legal tender status in any jurisdiction

Thai Gia Han, associate (left), and Nguyen Trung Nghia, legal assistant from Indochine Counsel

In Vietnam, virtual assets, Bitcoin, and other similar virtual currencies were determined to be neither a type of money nor a legal means of payment. The use of illegal means of payment will be subject to administrative sanctions or criminal prosecution for more serious acts.

Currently, the Vietnamese legal system does not have specific regulations regarding the recognition of virtual assets as one of the legitimate properties. The Civil Code 2015 only stipulates that property comprises “objects, money, valuable papers and property rights” and does not provide a clear answer to whether virtual assets are considered property or not.

Distinguishing virtual assets and similar types

In actuality, “virtual asset” and “digital asset” are occasionally used synonymously. To clarify their nature, we will contrast them with other types of cryptocurrencies and digital currencies based on the following precise criteria:

Type of Asset

Definition

Purpose of Use

Common Manifestation

Virtual Asset

As described in Section “Overview” above

Means of exchange Utilized for transactions, transfers, payments, or investments Security Means of payment Special Good

Digital Asset

Any physical or non-physical assets are represented in digital format and stored on computer systems or the Internet As blockchain technology advances, digital assets are defined as electronic records confirming the rights or interests of an individual Broader than the virtual asset definition, as it encompasses virtual assets and other types. Being used for confirming the rights or interests of an individual A digital asset shall be considered as a virtual asset if it is used for “transactions, transfers, payments or investments, etc.” Documents, images, videos Digital books Digital assets on the Blockchain such as digital currencies, virtual currencies, etc.

Virtual Currency/ Crypto currency

A type of virtual asset Having the characteristics of currency but is not tied to fiat currency; and no legality as currency due to lack of issuance by central bank or competent authority Being used and accepted as a payment method by individual or legal entity in a specific environment Means of exchange Conversion / transfer and storage Transaction through electronic method Bitcoin Ethereum Binance Coin Tether Solana

Electronic Currency

Encompassing all types of currency do not exist in any physical form Because of issuance by the State Bank, it may manifest in digital or electronic forms of fiat currency and exchange for fiat currency at one-to-one rate Utilized for transfer the value of the fiat currency Used for exchange and payment Store value, medium of exchange and unit of account

The currency value is stored in:

Pre-paid bank card E-wallet Mobile electronic devices “Bitcoin Robbery” and legal validity Vietnam

In May 2023, the People’s Court in Ho Chi Minh City adjudicated a criminal case related to the robbery of virtual currencies with a total value of up to 37 billion VND.

Accordingly, the trial council asserted that although Vietnamese law has not accepted Bitcoin as currency or a means of payment, the act of robbing Bitcoin constitutes an offence. This is because the assessment of its value in terms of money – a type of property, can be easily accomplished by an appraisal agency, implying that the economic value held by those who own it cannot be denied.

Furthermore, from a theoretical perspective, “robbery” is a crime with formal components, meaning it constitutes a crime with objective signs of being a dangerous behaviour for society. From their behaviour, the accused were fully aware that using force to control the victim, and subsequently seizing Bitcoin constituted behaviour detrimental to society.

The accused committed acts aimed at misappropriating Bitcoin, and subjectively, they perceived this virtual currency as property as the accused sold Bitcoin to convert it into VND and used it collectively. Therefore, the perspective of the trial council is entirely justified and reasonable.

Recommendations

For conformity with the remarkable advancements in international law, it is necessary to recognise the legal validity of virtual assets in Vietnam. This is because, fundamentally, virtual assets share similarities with property rights that are held in monetary value, transferred in civil transactions, and governed by individuals.

In essence, virtual assets are merely representations of information that have in the form of specific computer code that exhibit a unity of intrinsic and outward characteristics. Accordingly, ownership rights cannot be directly exercised, and these rights can only be realised through the monetary value of the virtual assets, which is not dissimilar to intellectual property rights (intangible in nature) recognised as a property right in Vietnam.

Pending further actions by policymakers on the recognition of virtual assets, several recommendations are offered to provide a legitimate legal framework.

Firstly, the state agencies need to take initial steps to review and assess the current state of virtual assets in Vietnam. This is to identify their responsibilities and establish suitable mechanisms for control and risk mitigation.

Continuing with the analysis, disputes arising from virtual assets fall outside the scope of Vietnamese law regulation. Therefore, the State Bank of Vietnam needs to collaborate with specialised agencies to establish regulations on the definition, legal validity, dispute resolution mechanisms, etc. to recognise virtual assets and transactions related to virtual assets.

Thirdly, due to the intangible nature of virtual assets, they easily become tools for fraud, money laundering, and tax evasion, etc. Therefore, state authorities must establish special control mechanisms by categorising the virtual asset business sector as conditional business lines, allowing operations only with the issuance of licences.

The Vietnamese government is taking steps to establish a legal framework for virtual assets, which will help dismantle initial legal barriers and facilitate the development of this asset class. However, it is important to note that virtual assets come with various risks, and it is crucial to manage and regulate them effectively to prevent potential challenges.

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