JAKARTA - The State Bank of Vietnam is reported to be the latest central bank to research the feasibility and operational exploration of a central bank digital currency (CBDC), this July.
Different from other countries, it is looking to test a digital currency that will be firmly built on blockchain technology.
According to a report by Viet Nam News, Saturday, July 3, Prime Minister Phạm Minh Chính announced the initiative as part of a broader e-government development strategy. The central bank is expected to build and implement a pilot from 2021 to 2023.
Vietnamese politicians' treatment of blockchain technology, however, looks different from their widespread hostility to decentralized currencies. The country banned Bitcoin (BTC) in 2018 as a means of payment while preserving the right of individuals and companies to invest privately in crypto.
The ban was immediately followed by directives to credit institutions to limit the services provided to digital currency-related activities in order to reduce the risk of money laundering. Despite the two measures, there is no formal regulatory framework for crypto exchanges operating in Vietnam yet.
Since the spring of 2020, this hostile but relatively hands-off approach has begun to shift. In May of that year, Vietnam's Ministry of Finance agreed to establish a research group tasked with studying and making policy proposals regarding cryptocurrencies and digital assets.
The group, which includes the State Bank, also includes the country's securities regulator, the Ministry of Banking and Financial Institutions, Vietnam's General Department of Customs and Excise, and others.
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Huỳnh Phước Nghĩa, deputy director of the Innovation Institute at Ho Chi Minh City Economic University (UEH), told reporters that as cashless payments continue to increase in the country, the recognition of digital currencies by the State Bank will help to further accelerate this process.
“Digital money is an inevitable trend” and conducting trials will help governments assess the pros and cons of different approaches and to explore appropriate management mechanisms”, said Nghĩa.
Another resource person, Lê t Chí, who is deputy head of the UEH Faculty of Finance, emphasized that swift action is needed for the country to compete as the momentum behind CBDCs continues to grow.
Viet Nam News argues that the issuance of CBDCs can be useful for small countries in a global system dominated by the US dollar, and, to a lesser extent, the euro and yen. However, Chí, apart from calling for accelerated study and development of CBDCs, emphasized the potential risks to the country's financial and monetary security.
A representative from the NextTech Group of Technopreneurs — a group of companies focused on digital commerce across Southeast Asia — argued that Vietnam needed to define an official definition for cryptocurrency.
Before the government formed its research group in May 2020, Vietnamese police officials urged citizens not to participate in crypto investment schemes.
This March, Vietnam's Ministry of Finance itself warned the public about the risks of investing in cryptocurrencies, given the still unregulated status of the industry in the country.
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