Vietnam cracking down on use of crypto currency

16:01 | 24/05/2018 Economy

(VEN) - The crypto currency fever is hitting investors not only in developed countries but also in Vietnam. Although Vietnamese law bans crypto currency exchanges, many people in the country continue investing in this highly risky business.

vietnam cracking down on use of crypto currency
Demonstrating against crypto currency fraud

Fear and greed

In early April, dozens of people rushed to the headquarters of the Modern Tech Corporation (MTC) in Ho Chi Minh City to claim their money back. MTC had sold iFan and Pincoin – a crypto currency – to about 32,000 people. After investors spent VND15 trillion buying iFan and Pincoin, MTC disappeared with all the money, without paying any interest or principal.

iFan investors said MTC cheated them when telling them that iFan is a prestigious crypto currency from Singapore, which could be used to gain naturalized status in the US, to pay with it like a credit card, and/or have it listed on the US Nasdaq stock exchange. MTC promised a payback rate of 48 percent upward and committed that iFan buyers would recover their principal investment within no more than four months. MTC also pledged an eight-percent commission rate for those who attract new buyers.

Crypto currency exchange is a risky business everywhere. In Vietnam, investor rights and interests are not protected as there is no legal framework governing this business.

Lawyer Dr. Bui Quang Tin, a lecturer from the Banking University of Ho Chi Minh City, said unscrupulous business people cleverly appeal to people’s greed and hopes. Although crypto currency buyers were warned of the potential risks, they went ahead because of the promises of high profit and commissions. An investor from the city’s District 7 admitted that crypto currency buyers like him were cheated due to their greed and trust in an impossible profit rate.

Tightening management

Nguyen Hoang Minh, Deputy Director of the State Bank of Vietnam (SBV) in Ho Chi Minh City, said crypto currency is always a risk to its owners because of its anonymity and lack of control by any official authority. SBV has warned people often of potential risks associated with crypto currency exchange, including multi-level marketing, and emphasized that crypto currency like iFan and Bitcoin are illegal in Vietnam, Minh said.

According to Article 27, section 6 of Government Decree 96/2014/ND-CP on administrative sanctions for monetary and banking law infractors, those who issue, distribute and/or use illegal means of payment including crypto currency like Bitcoin shall be subject to a fine of VND150-200 million. Starting on January 1, 2018, those who issue, distribute and/or use illegal means of payment including crypto currency can be subject to prosecution in accordance with Section1, Point h, Article 206 of 2015 Criminal Code that was amended and supplemented in 2017.

Financial and banking expert Dr. Nguyen Tri Hieu warns of a financial crisis unless the quantity of crypto currency circulating in Vietnam is controlled, with a negative impact on inflation. Crypto currency is also a tool for money laundering and illegal transfer of assets abroad so the government should issue a legal framework to protect investor interests and ensure the financial market’s security, Hieu said.

One should understand that companies like MTC have to use money of new buyers to make good on a promised payback rate of 48 percent, and will disappear once they can no longer lure new buyers, leaving the buyers with worthless promises, Dr. Hieu said.

Lawyer Dr. Bui Quang Tin, a lecturer from the Banking University of Ho Chi Minh City, said state authorities should enact regulations to govern crypto currency as soon as possible. In the absence of a specific legal framework, investors should not get involved in any crypto currency business, he warned. Commercial banks have been told to inform the SBV of doubtful virtual currency transactions so immediate control measures can be applied.

The Prime Minister issued Instruction10/CT-TTg to strengthen the management of activities related to crypto or digital currencies, including Bitcoin. The instruction is an effort to minimize risks and negative impact on the economy and society. The instruction bans credit institutions and intermediary payment service providers to conduct illegal crypto currency transactions.

According to the instruction, SBV will enhance its review and inform relevant authorities of suspicious transactions. The Ministry of Finance shall direct public companies, securities companies, fund management companies and securities investment funds not to issue crypto currency and not to engage in its transaction and brokerage activities. They must also comply with anti-money laundering laws, and propose measures to deal with crypto currency-related capital mobilization activities.

The Prime Minister told the Ministry of Industry and Trade to work with the Ministry of Public Security to detect, prevent and promptly handle law violations by organizations and individuals related to illegal crypto currency capital mobilization and multi-level marketing activities. He also urged them to work with concerned ministries and sectors in detecting and promptly dealing with use of crypto currency as illegal means of payment on websites and other electronic commerce application sites.

Ngoc Thao & Minh Long