Investopedia provides a description of an Initial Coin Offering (“ICO”) as follows: “A company seeking to raise money to create a new coin, app, or service can launch an as a way to raise funds. Interested investors can buy into an ICO to receive a new cryptocurrency token issued by the company. This token may have some utility related to the product or service that the company is offering or represent a stake in the company or project.”[1] In this sense, in 2017, the State Bank of Vietnam (“SBV”) explicitly stated that Cryptocurrency is not a legal tender in the territory of Vietnam and condemned the offering, supplying and using of Cryptocurrency as a payment method as serious offenses that are subject to both administrative and criminal sanctions.[2]
That being said, the written laws of Vietnam have not particularly addressed the Cryptocurrency as a main topic. All the contemporary regulations focus on the ineligibility of Cryptocurrency for being a payment method in Vietnam, either directly under Decree No. 88/2019/ND-CP[3], which provides for administrative sanctions for using illegal payment method, or indirectly under the Criminal Code 2015[4], which provides for punishment for money laundering and terrorism financing that Cryptocurrency is already notorious for. It follows that the crucial issue of what a Cryptocurrency is under the laws of Vietnam is still unresolved.
One explanation for this confusing situation is the fact that Cryptocurrency is hardly fit into any available legally defined objects under the laws of Vietnam. First, the Cryptocurrency is not recognized as a property under the Civil Code 2015[5] or goods under the Law on Commerce 2005[6] because it neither falls into the listed items provided for therein or satisfied criteria specified thereby. Second, the Cryptocurrency is also not a foreign currency.[7] It follows from this non-property and non-currency aspect that no one seemingly knows what regulations can be used to apply to the Cryptocurrency.
Nonetheless, in 2017, a local tax authority in Vietnam attempted to collect in relation to Cryptocurrency trading activities of an individual. The case goes to the provincial court that eventually ruled in favor of the trader due to non-recognition of Cryptocurrency as a good and collecting taxes on the trading of it could be construed as implicitly realizing the Cryptocurrency as a form of property.
At any rate, Cryptocurrency offering, mining and trading are not prohibited in Vietnam. Looking at the list of goods banned from imported into the territory of Vietnam provided for by Decree No. 69/2018/ND-CP, there is no such item as a mining machine. The list of prohibited business activities provided for by Decree No. 31/2021/ND-CP also does not include offering, mining or trading Cryptocurrency. One can only be found guilty administratively or criminally should the mining or trading of Cryptocurrency leads to using of illegal payment method or criminal acts. Thus, the offering, mining and trading of Cryptocurrency per se does not constitute any explicit violation. However, in the absence of a clear legal framework, Cryptocurrency investors and traders will not be protected by the laws in case of dispute in connection with their crypto assets.
To cope with this problematic issue, the Prime Minister has issued the Decision No. 1255/QD-TTg dated 21 August 2017 to approve an action plan to develop a legal framework on management of virtual assets, digital currencies, and virtual currencies. The Prime Minister also issued Directive No. 10/CT-TTg dated 11 April 2018 to tighten the management of the Cryptocurrency.
Following that, with the aim of tackling risks of money laundering, terrorism financing and tax evasion, the SBV, by the Directive No. 02/CT-NHNN dated 13 April 2018, 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.
The State Bank of Vietnam also issued the Directive No. 02/CT-NHNN dated 7 January 2021 to direct the card issuers, card payment organizations and providers of intermediary payment services to, inter alia, cooperate with each other in order to prevent illegal card transactions relating to virtual currency or digital currency.
To date, the relevant authorities of Vietnam are on the process to make proposal on regulations on transaction of the Cryptocurrency. Particularly, a committee to be in charge of studying and proposing policies to manage virtual assets and crypto currencies has been set up. The group had nine members, led by Mr. Pham Hong Son, deputy chairman of the State Securities Commission (“SSC”). Other members are from the SSC, the General Department of Taxation, SBV’s Department of Banking and Financial Institutions and Legal Department, Vietnam Customs and the National Institute for Vietnam Finance.
Given the regulatory framework for cryptocurrency business and investment remains in the pipeline, the Cryptocurrency investors and traders should seek legal advice before making any Cryptocurrency trading decision. At the moment, the issuance, supply, and use of the Cryptocurrency as means of payment could result in the following administrative and criminal penalties:
- A fine of up to VND 100,000,000 (approx. USD 4,300) for issuing, providing or using illegal payment instruments (Article 26.6(d) of Decree 88/2019/ND-CP).
- A fine of up to VND 300,000,000 (approx. USD 12,900) or imprisonment of up to 3 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 from VND 100,000,000 to VND 300,000,000 (Article 206.1(h) of the Criminal Code 2015 (as amended)).
