On January 1, 2018, Vietnam’s amended Penal Code takes effect, which outlaws the issuance, supply and usage of crypto currency, including Bitcoin, Litecoin and all other digital or virtual currencies that use cryptography. And while the law seems straight forward, government administrators have not said how they intent to enforce the new law, nor have they defined the legal status of periphery businesses. Examples:
What will the status be of software companies involved in block-chain activities, which are the heart of crypto currencies and how will the government monitor both corporate and individual “miners”?
According to a report in Tuoi Tre News website, “7,005 crypto-currency mining modules have been imported into Ho Chi Minh City this year and were cleared for import as of mid-December.” Between January and October, 1,400 mining modules had been shipped to HCMC including 1,310 modules designed for Bitcoin mining and 620 modules designed for Litecoin mining.
With tremendous media coverage and the price of Bitcoin surging to nearly $20,000 USD, more than 5,000 mining modules with an estimated value of more than $15 million USD were imported into HCMC during November and December so many individuals and companies are “investing” in mining module hardware and face significant financial losses if they are unable to continue.
An important factor in the increase of mining machine imports was the General Department of Vietnam Customs announcement to local customs departments which stated that the importation of crypto currency machines was legal “according to current laws” and that HCMC customs could clear those items.
Crypto currency mining is the process of solving “computational puzzles” – complex computer algorithms set by a blockchain that powers a digital currency – through which new coins are released and awarded to successful miners. Average prices of Bitcoin mining modules and computers are $3,000. It is estimated that there are more than 15,000 active “mining” machines in Vietnam that have been legally imported, but their status is in question on January 1st.
The new government regulations outlaw the issuance, supply and usage of crypto currency “in Vietnam” but do not state whether it is legal for Vietnamese individuals and companies to issue, supply and use crypto currency outside of Vietnam, so many people are waiting for additional guidance from the government.
Another question revolves around the status of crypto currency advertising in Vietnamese media. Many of Vietnam’s largest media websites are currently running crypto currency ads, but will it be legal or illegal for media to continue to accept advertising revenue from companies whose activities are legal in other parts of the world, but illegal in Vietnam?
There are no estimates of how much companies are spending in Vietnamese media, but there are crypto currency ads on many Vietnamese business and consumer websites and these websites are looking for guidance as to whether they will be able to continue to run ads after January 1st.
Crypto currency is a new phenomenon some see it as an “investment” option while others see it as a “payments” option and governments across the region are taking different approaches to it. In Japan, the government sees it as an “investment” vehicle and wants to limit it due to its speculative nature. The Korean government also looks at crypto currency as an “investment” option and announced that it will be taxed as capital gains. Singapore has a different attitude and is looking at crypto currency as a digital payment solution.
Under ASEAN’s 2020 integration plan, countries are supposed to open their markets to the free flow of capital, goods and human resources. The ten ASEAN countries all agree that digital currencies are valuable and each country is moving ahead with its digital currency plans. Crypto currency is a new issue, that is quickly changing, but there have been few discussions, if any, to create cohesive ASEAN positions and policies on the subject.
It will be interesting to see if Vietnam’s new crypto currency laws will be actively enforced or whether Vietnam will need to change its position on the subject because of ASEAN realities, and the realities of a global financial marketplace that is always on 24-hours per day and is only a mining module away.