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Vietnam considers bitcoin legalisation: what are the implications?

Alexander Honeyman | Dec. 23, 2016
According to VnEconomy, a regional publication in Vietnam, the country’s financial authorities will potentially legalise bitcoin and other cryptocurrencies by the end of 2017.

Additionally, bitcoin can be used to launder money, as well as purchase illegal weapons and arms, as well as enabling corruption and bribery.

This means that the year long deadline for the drafting of regulation imposed on Vietnam's Justice Ministry, the Information Ministry and the Trade Ministry is ambitious, but it's certainly not impossible. After all, Vietnamese lawmakers openly admit that they are behind other countries when it comes to defining virtual currency and how it can be regulated.

However, countries such as the Philippines also show how successful the adaptation of bitcoin can be.

Looking at a success model

In the Philippines, bitcoin has played a crucial role in the remittance process. For the Philippines, bitcoin works well because of the number of the country's citizens work abroad. Many of them work in South Korea, where remittances sent home by Filipinos account for roughly US$231m each year.

To make the most of this marker, South Korean start-ups have developed services to facilitate transactions, using bitcoin to transmit the funds.

These companies have also been incredibly successful, and bitcoin powered remittances now account for just over 20 per cent of remittances sent by Filipino workers in South Korea thanks to their very low charges in comparison to their competitors.

Could a similar bitcoin-based Model be rolled out across Asia?

Once the regulation comes into force in around a year, Vietnam will join countries such as the United States, Germany, Canada, Japan and France, who have also carved out regulatory practices that can be applied to bitcoin and related cryptocurrencies.

Bitcoin remittance has been a growing trend in Asia as well as some parts of South America, too. This is unsurprising, as digital currency as a means for money transfers entails far lower costs than using a credit card or an online account. But, even so, it appears unlikely that this idea will spread across the continent as a whole.

This, once more appears to be due to regulation and security issues. For example, Toast, a Singapore based start-up has now abandoned bitcoin for its remittances app because of fears over regulation. In addition, back in August, more than $60 million was stolen from bitcoin exchange Bitfinex in Hong Kong.

Bitcoin Market Value

Bitcoin/USD: A security breach in August saw bitcoin's value drop significantly (source: OANDA: Historical Rates)

Since then the value has surpassed the $800 mark and hasn't slowed down. In November, there were 286,753 bitcoin trades at its height, a dramatic rise that has seen traders cash in on its ever-improving stock. Yet, it will still be some time before the currency is as sought after as traditional money, especially if adoption and payment issues continue.

 

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