FACULTY OF POLITICAL ECONOMYGRADUATION THESIS CURRENT STATUS OF CRYPTOCURRENCY LEGALIZATION IN THE WORLD AND LESSONS FOR VIETNAM Instructor guides: Dr... FACULTY OF POLITICAL ECONOMYGRAD
CHING
China is the country with the second largest economy in the world and is also one of the major contributors to the cryptocurrency boom China ranks first in
During the peak of cryptocurrency mining, particularly for Bitcoin (BTC) and Ethereum (ETH), China dominated the landscape, accounting for up to 90% of all transactions and 75% of global mining activities This dominance was largely attributed to the country's advantages in energy costs, chip production, and affordable labor.
In response to the rapid growth of the cryptocurrency market, the Chinese government implemented strict limitations, with the People's Bank of China (PBOC) banning financial institutions from engaging in Bitcoin-related activities in 2013, resulting in a 50% drop in Bitcoin's value Since 2014, the PBOC has been working on a state-backed digital currency, aiming to be among the first central bank digital currencies The initiative began with the establishment of the Institute of Digital Currency, employing around 1,000 researchers to explore digital currency development Despite this interest, the government has maintained a cautious stance, emphasizing the need to prevent excessive speculation and ensuring that the financial sector supports the "real economy."
Zhou, the former head of the PBOC, emphasized that China is not rushing to develop digital currency, as regulators do not recognize cryptocurrencies like Bitcoin as valid payment methods comparable to cash or credit cards The banking system in China does not accept any existing cryptocurrencies or offer related services In 2017, several government agencies prohibited Initial Coin Offerings (ICOs), stating that tokens or cryptocurrencies from ICOs are not sanctioned by the monetary authority and cannot be considered legal tender or used as currency Consequently, despite interest in creating a fully supported digital currency, cryptocurrencies remain unrecognized by relevant authorities and are not utilized by the banking system for financial services.
The Chinese government has implemented strict measures against private cryptocurrency trading to safeguard investors and mitigate financial risks These actions include the prohibition of Initial Coin Offerings (ICOs), limitations on cryptocurrency trading platforms, and a crackdown on the extensive Bitcoin mining industry This has significantly impacted the global cryptocurrency market For instance, in September 2017, the People's Bank of China (PBOC) deemed ICOs illegal after Chinese investors raised nearly $400 million, leading to a requirement for refunds and a subsequent drop in Bitcoin's value by $200.
2018, the government banned all overseas cryptocurrency trading platforms after failing to clear transactions following the closure of all domestic sites.
China's strict management approach aligns with its economic growth and financial market evolution over the past two decades The country's rapid expansion has led to excessive leverage within the financial system, prompting government efforts to address these risks In recent years, the focus has shifted towards controlling financial risks and stabilizing the financial system.
The People's Bank of China (PBOC) has prioritized the regulation of internet platforms involved in Peer to Peer loans and micro-lending, focusing on their purge and rectification before the Initial Coin Offering (ICO) boom The significant rise in ICO activity, characterized by increased volume and funds raised, alongside various social disruptions linked to ICOs, ultimately led to a ban imposed by the PBOC.
In response to regulatory limitations on ICOs, market participants shifted their focus to Initial Miner Offerings (IMO), selling mining equipment to investors who received tokens for their mining activities This approach essentially masked ICOs as IMOs In 2018, the National Internet Finance Association of China (NIFA) identified this subversive tactic and warned potential investors, suggesting that IMOs could be a disguised form of ICOs, leading to a subsequent ban Following this warning, the IMO market in China experienced a significant collapse.
The Chinese government, despite its stringent regulations, actively promotes blockchain technology to modernize its financial system and establish global leadership in this innovative field, which they view as having a transformative impact akin to that of artificial intelligence In 2019, President Xi Jinping emphasized the need to "seize the opportunities" presented by blockchain, recognizing it as a vital breakthrough in independent innovation of core technologies The economic repercussions of the COVID-19 pandemic have intensified the government's commitment to digital technology, with the Ministry of Industry and Information highlighting blockchain as a key development that has significantly contributed to epidemic control and the resumption of industrial production.
Recent advancements in blockchain technology have sparked a surge of investment in China; however, the government remains cautious, aiming to mitigate potential social issues linked to its growth.
The People's Bank of China (PBOC) acknowledges the potential of blockchain technology but emphasizes the need for further research to ensure it effectively supports the real economy The PBOC advocates for the development of blockchain solutions that do not rely on tokens, which they associate with social issues like illegal fundraising and fraud.
The issuance and sale of tokens are prohibited under the Law of the People's Republic of China, specifically governed by the People's Bank of China (PBOC) since its amendment in 2003 Article 20 clearly states that no entities or individuals are allowed to print or sell promissory notes as substitutes for Renminbi in the market Those found illegally issuing and selling tokens face immediate cessation of activities and potential fines up to 200,000 Renminbi In 2018, the National Internet Finance Association of China (NIFA) advised investors to exercise extreme caution regarding Initial Coin Offerings (ICOs), warning that they may include false or fraudulent claims, while also announcing plans to enhance security measures Although the warning does not prohibit cryptocurrency trading abroad, there is a possibility of stricter regulatory actions being introduced by policymakers in the future.
China has recently enacted its long-anticipated civil code, which now recognizes cryptocurrencies as part of inheritance rights Despite ongoing efforts to legalize cryptocurrencies, the government maintains strict regulations on cryptocurrency transactions Additionally, China is poised to launch the world's first central bank-controlled digital currency, having already established the necessary infrastructure for its Digital Currency Electronic Payment System This initiative aims to grant the digital yuan legal status comparable to that of the physical yuan.
The People's Bank of China (PBOC) recently conducted one of the world's largest cryptocurrency tests by issuing digital coins in various cities, including Shenzhen, where nearly 50,000 coins were distributed through a public lottery, allowing use in over 3,000 local stores Additionally, 100,000 residents in Suzhou received 200 digital yuan each as part of a pilot program to facilitate cryptocurrency spending in physical shops Despite stringent regulations on unregulated cryptocurrencies, governments are likely to spearhead the advancement of blockchain technology and the development of centrally managed digital currencies Other notable blockchain projects include a cross-border financing platform overseen by the State Administration.
Foreign Exchange is enhancing information verification and financing for cross-border transactions across 19 provinces and cities in China Smart contracts are being utilized for automating contracts and resolving cases at the Hangzhou Internet Court In Shenzhen, a government service identification system has been implemented Tianjin Provincial Customs has introduced a logistics application to facilitate transactions Various public projects are anticipated to emerge in sectors such as anti-corruption, security, translation, and criminal investigation Additionally, private applications include product certification, invoicing, electronic payments, intellectual property recording, and managing pharmaceutical supply chains.
Chinese courts have recently recognized the legal status of cryptocurrencies as assets deserving protection, marking a significant shift in their approach In July 2019, the Hangzhou Internet Court became the first in China to affirm the legality of Bitcoin ownership under the General Civil Law This ruling stemmed from a case involving plaintiff Wu, who purchased 2,675 Bitcoins in 2013, only to find the FXBTC store closed in 2017 without notice, preventing him from accessing his assets Despite Wu's claims against Taobao and its parent company for damages amounting to 76,000 Renminbi, the court ruled that Taobao had fulfilled its legal obligations, leading to the dismissal of his claim This landmark decision underscores the evolving legal landscape for cryptocurrencies in China.
CURRENT STATUS OF CRYPTOCURRENCY REGULATION
Overview of the cryptocurrency market in Vietnam
The current era marks a significant period of economic integration and rapid Internet development, with cryptocurrency gaining immense popularity globally, including in Vietnam According to the 2022 Crypto Market Report by Coin98, Vietnam ranks second in ASEAN for the number of cryptocurrency holders, following Thailand, and is among the top five countries leading in blockchain technology.
Despite its long existence, cryptocurrency has gained significant attention from the Vietnamese public only in recent years Bitcoin, introduced in 2008, began to capture interest in Vietnam around 2010 through online searches It wasn't until 2013 that Bitcoin officially entered the Vietnamese market via a collaboration between Bitcoin Vietnam and the Israeli startup Bits of Gold, sparking a wave of development However, in mid-2014, the State Bank of Vietnam issued warnings regarding Bitcoin, deeming its trading illegal and advising investors to exercise extreme caution, which created uncertainty in the country's cryptocurrency landscape.
In 2017, the cryptocurrency market experienced a significant surge, with Bitcoin's price skyrocketing to $20,000, marking a nearly tenfold increase within just three months This rapid price escalation reinvigorated the Vietnamese market, but it also attracted unscrupulous individuals and organizations looking to exploit people's greed through scams, including notorious cases like BitConnect, OneCoin, and Confido Despite facing considerable skepticism, this period validated the potential of Blockchain technology, leading to increased confidence among global and Vietnamese investors Following the dramatic rise in 2017, the cryptocurrency market, particularly Bitcoin, faced notable fluctuations in the subsequent years.
In December 2018, Bitcoin experienced a significant correction, with its price and market capitalization plummeting to just $3,000 However, the cryptocurrency rebounded in the first half of 2019, reaching $14,000 by June, only to undergo nearly four more fluctuations in the following nine months This period saw Bitcoin's price change dramatically, leading to widespread accusations of market manipulation.
Despite skepticism surrounding cryptocurrencies during the COVID-19 pandemic, 2020 emerged as a transformative year for Bitcoin and the broader crypto market Bitcoin demonstrated its value as a safe haven and anti-inflation asset, skyrocketing from $4,000 in March 2020 to $65,000 by April 2021 This surge catalyzed significant price increases for numerous altcoins, with some experiencing exponential growth Additionally, a Statista survey revealed that Vietnam ranked second globally in cryptocurrency popularity, with 21% of respondents indicating they had used or owned digital currencies.
Figure 3.1: Price of Bitcoin skyrocket in the period of March 2020 to April
In 2022, the cryptocurrency market experienced a significant downturn, often referred to as a "winter" or "correction" phase, highlighted by numerous bankruptcies among coins and their founders The collapse began with Terra and its two coins, TerraUSD and LUNA, which faced widespread criticism for their unsustainable operating model In May 2022, LUNA's value plummeted dramatically from $86 to just $0.005 within a mere ten days, resulting in a staggering loss of value.
The collapse of Terra, founded by Do Kwon, resulted in a staggering $40 billion loss and triggered a cascade of issues across the cryptocurrency market This turmoil led to the simultaneous bankruptcy announcements of several investment funds associated with Terra, including notable firms like 3AC, Celsius, and Voyager.
At the end of 2022, the market received another shock when one of the largest exchanges in the world at this time: FTX also announced bankruptcy The exchange's
CEO, Sam Bankman-Fried, faced a series of charges and was arrested for using user assets for other purposes. ast Terra
CPI cao kủ lục rx
FTX phá sản ad thie: Te
Figure 3.2: Major events affecting the world Crypto industry in 2022
(Source: C98 Insights) However, Vietnam continues to be among the world's leading countries in cryptocurrency adoption by 2022, just behind India and Nigeria From July 2021 to
June 2022, the value of transaction activities related to "digital" assets in Vietnam has reached 112.6 billion USD, with nearly 17 million people owning cryptocurrency.
Vietnam is emerging as a key player in the Blockchain sector, with seven of the top 200 global businesses founded by Vietnamese entrepreneurs, as recognized by Crypto Notably, the game Axie Infinity (AXS) stands out, boasting a market capitalization of nearly $800 million by the end of 2022.
MarketsandMarkets, the Blockchain-related market in Vietnam is expected to reach a value of nearly 2.5 billion USD by 2026, an increase of 5 times compared to 2021.
Figure 3.3: Token capitalization of Crypto projects in Vietnam as of December
(Source: Coin98 Insights) Information on website traffic reflects the popularity of cryptocurrencies in Vietnam and users’ interest in cryptocurrency projects According to SEMrush, in
In 2022, the top three cryptocurrency-related websites in Vietnam were Binance, CoinMarketCap, and CoinGecko Despite minimal changes in the local market, these platforms experienced a notable decline in global traffic, reflecting a downturn in the cryptocurrency market Vietnamese investors are increasingly focusing on new blockchain projects, with Aptos and Sui Network leading in access rates at 12.47% and 10.78%, respectively The popularity of Binance, CoinMarketCap, and CoinGecko among investors indicates a robust interest in cryptocurrency, with estimates suggesting over 13 million cryptocurrency users in Vietnam by the end of 2022.
Surveys by Morning Consult and Bloomberg Opinion reveal that over 26 million people in Vietnam engage in cryptocurrency transactions monthly, predominantly young investors aged 18 to 25 However, many of these inexperienced investors often face financial losses due to their limited market knowledge The leading platforms for cryptocurrency transactions in Vietnam include Ethereum, BNB Smart Chain, Solana, and Polygon, with USDT being the most widely used stablecoin By 2022, the DeFi and Layer 1 sectors have emerged as key areas within Vietnam's cryptocurrency investment landscape.
Current status of cryptocurrency regulation in Vietnam
On February 27, 2014, the State Bank of Vietnam published the first press release about cryptocurrency This announcement focuses on some basic issues as follows:
Bitcoin is a decentralized digital currency, or cryptocurrency, that is not issued by any government or financial institution It is generated and functions through a network of interconnected computers on the internet.
The rise of Bitcoin presents significant challenges and risks for users, including its potential use in criminal activities such as money laundering, drug trafficking, tax evasion, and illegal property transactions Additionally, users face threats of hacking, data theft, transaction disruptions, and the possibility of financial bubbles, which can lead to substantial losses for investors Furthermore, Bitcoin operates without oversight from any state regulatory agency, leaving owners to navigate these risks independently, with no protective mechanisms in place for their rights.
The announcement explicitly clarifies that Bitcoin and similar cryptocurrencies are not legally recognized or protected as a means of payment Furthermore, credit institutions are prohibited from using Bitcoin and other cryptocurrencies as currency when offering services to their customers.
The announcement emphasizes that engaging in the ownership, purchase, sale, and use of Bitcoin and similar cryptocurrencies involves significant risks and lacks legal protection for individuals.
Following the press release on February 27, 2014, on the morning of October
On January 28, 2017, the State Bank of Vietnam officially declared that Bitcoin and other cryptocurrencies are not recognized as legal tender in the country Consequently, the issuance, distribution, and use of Bitcoin and similar cryptocurrencies as a payment method are prohibited in Vietnam.
As of now, Vietnam lacks official legal documentation governing virtual assets and cryptocurrencies, with existing banking and financial laws not recognizing them as currencies or payment methods Despite the ongoing cryptocurrency-related transactions, the absence of regulatory frameworks has resulted in numerous violations that remain unaddressed This emerging issue poses significant challenges for legal regulation in both Vietnam and globally.
The legal framework for testing banking technology in Vietnam is still under development by the Commercial Joint Stock Bank According to the Department of Cyber Security and High-Tech Crime Prevention, the number of cryptocurrency users in the country is rapidly increasing, with an estimated million individuals engaging in daily transactions valued at hundreds of billions of dongs.
Many organizations and individuals in Vietnam leverage the anonymity of cryptocurrency, often operating without official business registration Prominent online multi-level marketing activities include financial investments and Initial Coin Offerings (ICOs) of cryptocurrencies Current popular multi-level business models encompass foreign exchange investments, financial investment funds, stock offerings, corporate shares, and binary trading The landscape of online multi-level business violations has become increasingly complex, with numerous new methods and schemes emerging across the country.
On August 21, 2017, the Prime Minister of Vietnam issued Decision No 1255/QD - TTg to enhance the legal framework for managing virtual assets and cryptocurrency, in response to the unpredictable developments and negative impacts associated with these activities This initiative aims to systematize the Party and State's guidelines on property rights protection, ensuring the legal rights and interests of both domestic and foreign investors are safeguarded Additionally, it seeks to effectively limit, prevent, and control risks and abuses related to cryptocurrencies, while clarifying property rights regulations in the 2015 Civil Code concerning virtual assets.
To effectively develop a legal framework for virtual assets and cryptocurrencies, it is essential to research and integrate international best practices This approach should prioritize uniformity, consistency, and transparency, ensuring a stable and predictable legal environment that aligns with global standards.
At the same time, completing the legal framework must also meet the following 3 goals:
Conduct thorough research to accurately understand the nature of virtual assets and cryptocurrencies, drawing on both international experiences and local realities This involves analyzing their connection to tangible assets and fiat currency, as well as examining the role of virtual assets and cryptocurrencies within legal frameworks and their influence on the legal system.
This article provides a comprehensive review of the legal landscape surrounding virtual assets and cryptocurrencies in Vietnam, analyzing regulatory practices from other countries and their influence on Vietnam's legal framework It proposes specific tasks and guidelines aimed at enhancing laws related to virtual assets, ensuring they effectively address associated risks while fostering innovation and entrepreneurship The goal is to create flexible regulations that can adapt to the rapid advancements in information technology and e-commerce, striking a balance between control and growth.
Assign relevant ministries and branches specific responsibilities and determine an implementation roadmap to resolve specific legal issues related to virtual assets, cryptocurrencies, and cryptocurrencies.
The Prime Minister has tasked the Ministry of Justice with implementing Decision No 1255, while the Ministry of Finance is responsible for developing legal documents concerning virtual assets and cryptocurrency regulations Additionally, the State Bank is assigned to research and issue new legal frameworks for cryptocurrency As outlined in Report No 27/BC-BTP dated February 17, 2021, the Ministry of Finance has formed a Research Group focused on virtual assets and cryptocurrencies to propose legal documents for managing and supervising the issuance and trading of these assets in the securities sector Furthermore, the Ministry is working on establishing a legal framework for digital asset management within the Vietnamese stock market.
The rise of cryptocurrency is an inevitable trend shaped by advancements in science and technology, particularly in information and communication technology With adoption rates reaching unprecedented levels, cryptocurrencies are poised to become a new global means of exchange and payment, reflecting a significant public acceptance as an efficient medium This trend mirrors the emergence of the commercial Internet in the late 1980s To stay aligned with global developments, Vietnam must devise appropriate strategies to navigate these changes The swift integration of cryptocurrencies and the recognition of the electronic market necessitate the establishment of a robust legal framework for managing the cryptocurrency market in Vietnam.
The absence of a clear legal framework for cryptocurrencies in Vietnam has led to various disputes, notably the cryptocurrency tax arrears case in Ben Tre province This case involves Mr Nguyen Viet Cuong, a cryptocurrency trader, who contends that cryptocurrencies should not be classified as commodities, thus exempting him from business registration In contrast, the tax authorities argue that cryptocurrencies are considered property, hold equivalent value to money, and can be involved in civil transactions.
The urgency for creating a legal and management framework for
The rapid advancement of science and technology presents a significant challenge for countries worldwide, including Vietnam, where the regulation of cryptocurrencies remains in its early stages Establishing a clear and stable legal framework is essential to keep pace with these innovations By leveraging technology effectively, Vietnam can transform challenges into opportunities, fostering sustainable economic development and accelerating progress in the digital economy.
The current global and Vietnamese landscape regarding cryptocurrency highlights the complexity of this currency, necessitating significant time and effort to establish a comprehensive legal framework Vietnam lacks a robust legal structure to harness the potential of cryptocurrency, despite the widespread application of Blockchain technology in digital and virtual assets This absence of regulation hinders the growth of startups in the Blockchain sector, particularly in areas such as capital raising through digital asset issuance (including ICOs, ITOs, and STOs) and the operation of cryptocurrency exchanges.
The current situation has led to a significant "brain drain," with Blockchain startups compelled to register abroad despite having resources in Vietnam Ms Hanh emphasizes that a suitable legal framework for asset management and capital mobilization could enhance the effectiveness of these startups While few countries have formally recognized virtual assets in legal documents, there are ongoing efforts to integrate them into the legal system Acknowledging "virtual assets" as property within the Civil Code would clarify ownership in transactions and aid in resolving disputes related to crime, theft, and fraud involving these assets.
The rise of cryptographic assets is an essential trend that necessitates effective management strategies As technology advances within the framework of the 4.0 Revolution, new asset forms have emerged, particularly digital assets, which have seen remarkable growth Research from the Boston Consulting Group indicates that by 2030, tokenized assets may represent 10% of global GDP, or approximately $16.1 trillion In contrast, this figure was only $310 billion in 2022, making up about 0.4% of GDP Projections suggest a rise to $600 billion in 2023, representing 0.6% of global GDP, with expectations of continued growth beyond 2024, potentially exceeding $10 trillion and 7% of global GDP by 2028 In Vietnam, Blockchain technology is recognized as a priority for research, development, and application, positioning the country to actively engage in the 4.0 Revolution.
The complexity of cryptoassets has led to diverse regulatory approaches worldwide In Vietnam, cryptocurrencies are not recognized as legal payment methods, nor is their status as commodities or assets defined Despite this lack of recognition, trading in crypto assets continues to expand The absence of legal classification for these assets hampers the application of tax policies akin to those governing securities in ICO, ITO, and STO activities, potentially resulting in lost tax revenue from profitable crypto-related activities.
A robust legal framework for cryptocurrencies is essential to harness the opportunities presented by advancements in science and technology Vietnam must create and implement new or revised laws to govern emerging transaction forms, mitigating risks while fostering economic growth and safeguarding the legal rights and interests of investors, organizations, and individuals involved.
LESSONS FOR VIETNAM ©es©ce<ceecesseeeeeesrs 100
Current socio-economic context in Vietnam
Vietnam's economic integration has evolved significantly over nearly fifty years since its independence and unification, establishing the nation as a proactive and responsible participant in global cooperation and development This integration process can be categorized into various developmental stages, reflecting Vietnam's growing prominence in the international community.
Vietnam's journey to join the World Trade Organization (WTO) began with its application in 2001, leading to extensive multilateral and bilateral negotiations with member countries During this period, Vietnam committed to significant reforms, focusing on tariff reductions, market liberalization, and the protection of intellectual property rights to align with WTO standards These adjustments in trade and investment practices were crucial for compliance Ultimately, on November 7, 2006, Vietnam signed the WTO Accession Agreement at the World Ministerial Conference in Geneva, marking a significant milestone Following this, Vietnam undertook final reforms to ensure adherence to its commitments and the organization's standards, with implementation commencing on January 11.
In 2007, Vietnam became an official member of the WTO, marking a significant milestone in its international economic integration journey This membership has enabled Vietnam to access global markets, lower tariffs, and eliminate trade barriers, fostering an environment conducive to the country's development and further integration into the global economy.
Vietnam has actively promoted foreign direct investment (FDI) as a key component of its international economic integration strategy, focusing on strategic sectors such as information technology, financial services, industrial production, and energy The country has prioritized industries with high development potential and has implemented legal reforms to create a favorable business environment for foreign investors This includes passing new laws, reducing tariffs, and establishing industrial parks and special economic zones Additionally, Vietnam has signed the ASEAN-Korea Free Trade Agreement (AKFTA) and participated in the Asia-Pacific Economic Cooperation Forum (APEC) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to enhance its attractiveness to foreign investors As a result, Vietnam has successfully attracted $20 billion in FDI within just six years, marking a significant achievement in its economic development journey.
4.1.1.2 The period after joining the WTO to the present.
After joining the World Trade Organization (WTO) in 2007, Vietnam has recorded a series of impressive achievements in international economic integration.
Thanks to the determination to integrate and reform mechanisms, Vietnam's economy has undergone a period of strong and sustainable development.
From 2007 to 2020, Vietnam achieved an impressive average GDP growth rate of approximately 6.3% annually, making it the fastest-growing economy in Southeast Asia and one of the quickest globally The country has successfully opened its market, leveraging opportunities to boost exports significantly As a result, Vietnam's total export value surged from 48.6 billion USD in 2007 to 336.3 billion USD in 2020, playing a crucial role in driving economic growth.
Joining the WTO has significantly boosted Vietnam's ability to attract foreign direct investment (FDI), with over 360 billion USD drawn in from 2007 to 2020, particularly from Korea, Japan, Singapore, and China These FDI projects have played a crucial role in the nation's economic growth Additionally, Vietnam's participation in key international free trade agreements (FTAs) such as the CPTPP and EVFTA has further expanded export markets and created advantageous conditions for local businesses.
Since joining the WTO, Vietnam has significantly enhanced its infrastructure and logistics, crucial for its international economic integration Investments in transportation, including airports like Tan Son Nhat and Noi Bai, as well as international seaports such as Cat Lai, have laid a strong foundation for economic growth Key projects in highways, railways, and pipelines have improved connectivity between manufacturing hubs and consumer markets, while a robust logistics system has optimized supply chains and reduced shipping times Additionally, enhancements in the business environment and customs procedures have streamlined the import and export processes As a result, Vietnam has emerged as a vital player in the global supply chain and a key export center in the region, expanding its trade markets across the globe with a diverse range of products, including high-tech items, textiles, agricultural products, and industrial goods.
These achievements have made Vietnam one of the countries with remarkable economic growth and international economic integration in the region and the world.
Electronic payment is rapidly gaining popularity worldwide, including in Vietnam, where high Internet and mobile device usage is prominent As reported by Digital 2022, Vietnam had 72 million Internet users by February 2022, representing over 73% of the population Notably, a significant portion of these users are young, with 50% of the population eager to engage with and learn about technology.
The COVID-19 pandemic has significantly altered daily life over the past two years, leading to changes in shopping behaviors and an increased demand for cashless payment methods to minimize contact and curb the virus's spread While many industries have struggled during this time, the e-commerce and digital payment sectors have experienced remarkable growth in both transaction volume and value.
Figure 4.1: Number of mobile phone users with Internet connection in Vietnam
In the first 10 months of 2021, the State Bank's Payment Department reported a 49.39% increase in internet transaction quantity and a 29.14% rise in value Mobile transactions surged by 72.67% in quantity and 85.09% in value, while QR code transactions saw a remarkable 54.24% increase in quantity and a staggering 120.64% rise in value compared to 2020 Additionally, data from NAPAS revealed an 89% growth in the number of transactions and a 123% increase in value during the first quarter of 2022 Notably, cash withdrawal transactions through ATMs have been declining in both quantity and value.
The payment market in Vietnam has experienced significant growth, driven by the rise of payment intermediaries and financial technology companies offering innovative payment solutions These include QR code payments, e-wallets, and various applications, all of which are enhancing the electronic payment landscape in the country As a result, the future of electronic payments in Vietnam looks promising.
To meet this, State Bank of Vietnam has issued a Plan to implement Decision
On October 28, 2021, the Prime Minister approved Project No 1813/QD-TTg, aimed at advancing non-cash payments in Vietnam from 2021 to 2025 This initiative underscores the Vietnamese Government's dedication to enhancing the efficiency, convenience, and safety of financial transactions nationwide The implementation of this project has already yielded positive outcomes.
The interbank electronic payment system, along with the financial switching and electronic clearing system, is functioning reliably and witnessing substantial growth in both transaction volume and value In the first 11 months of 2022, notable increases were observed across various sectors.
The Interbank Electronic Payment system saw a 0.56% rise in local currency transactions, totaling over 141.82 million transactions This increase corresponds to a significant value surge of 31.39%, amounting to over 177.23 trillion VND.
- The financial switching and electronic clearing system processed more than 3,770.15 million transactions with a transaction value of over 38,101 trillion VND, an increase of 99.79% in quantity and 106.09% in value.
- Regarding the equipment network for payment transactions, there are 20,889ATMs and 404,726 Point of Sale on the market, with growth of 3.6% and28.09% respectively over the same period in 2021.
In the first 11 months of 2022, the interbank electronic payment system processed over 6.6 billion transactions, totaling more than 192.38 trillion VND, reflecting an 85.6% increase in transaction volume and a 31.39% rise in value Payment methods such as Internet banking, mobile payments, QR codes, and Point of Sale systems have also experienced significant growth in both transaction volume and value.