HANOI: Vietnam has vowed to tighten regulations on cryptocurrencies as authorities investigate an alleged multi-million-dollar fraud in the country, where digital units are traded in a shadowy and unregulated market.
Paying with cryptocurrencies is illegal in Vietnam, where they are not recognized as a legitimate tender by the central bank. However there are currently no laws explicitly banning the possession of assets such as Bitcoin and Ethereum.
Regulators have battled to gain control of cryptocurrency markets across Asia, from China to South Korea and Thailand, amid fears that Bitcoin and others—untaxable assets that are exchanged independent of governments and banks—could be used to launder money and fund criminal or terrorist networks.
A directive signed by Vietnam’s Prime Minister Nguyen Xuan Phuc on Wednesday requested to “strengthen the management of activities related to cryptocurrencies.”
It comes after a Vietnamese company, Modern Tech Jsc, was accused of scamming $660 million from tens of thousands of people who bought iFan and Pincoin cryptocurrencies, according to state media.
The Ho Chi Minh City-based company promised to repay clients monthly interest—and more if they could attract other customers—but has been slow to pay them back as the value of iFan and Pincoin slumps, VNExpress reported.
City authorities have asked police to investigate.
Investing and trading the currencies is “increasingly complicated and threatens to affect the stability of the market, social order… (and) can pose great risks to organizations and individuals involved”, the new directive said.
It warned financial institutions against accepting the currencies and said authorities would “detect and handle” those dealing in the illegal units.
Vietnam said last year it would consider developing a legal framework to manage virtual currencies and digital assets as they increase in popularity in the country.
With a booming startup sector staffed by young talent, Vietnam has gained a reputation as a hub for homegrown blockchain tech development. Several Bitcoin cafes have also opened to cater to a growing class of local cryptocurrency investors.
But while regulation may help build confidence in the sector, some say a heavy-handed approach in Vietnam could quash ambition—and income for the government.
“If there’s too much regulation, that’s going to hamper a very interesting, unique, and potential innovation stream for Vietnam, which could be a great source of foreign direct investment,” said Thomas Glucksmann, head of Asia-Pacific business development at Gatecoin, a Hong Kong-based cryptocurrency and blockchain token exchange.
In addition to fears over using cryptocurrency for criminal means, analysts have warned of a Bitcoin bubble after its price soared to record highs near $20,000 in December. The price has now dipped to about $6,800 amid fears of a crackdown on trading.
The directive announced in Vietnam chilled some cryptocurrency investors in the country, including one who said he may consider moving business elsewhere.
“Since the government wants to tighten regulations on cryptocurrency, I may not invest in cryptocurrency in Vietnam, maybe… in other countries,” he told Agence France-Presse, asking not to be named.