Key takeaways
- Vietnam has declared the use of cryptocurrency as a payment method for goods and services illegal. The government is concerned about the impact of crypto on financial stability.
- It is still legal to own and trade cryptocurrency on an exchange, but due to a lack of regulation, this is still a gray area.
- Vietnam will have developed a major legal framework for crypto regulation by 2025. This will address ownership, AML measures, taxation policies and licensing requirements for crypto operations.
- Cryptocurrency is incredibly popular in Vietnam, with adoption levels regularly leading the global adoption index.
The Vietnamese people love cryptocurrency. The country is one of the global leaders in adoption rates and trading volumes. Unfortunately, crypto owners and businesses still face regulatory and legal challenges. This is frustrating for a sector that is soaring in popularity.
The government is careful in its steps, taking a cautious approach to balance the potential benefits of blockchain with concerns about financial stability.
There are plans to introduce a legal framework for cryptocurrency regulations in Vietnam for 2025. This takes input from various regulatory bodies, including the State Bank of Vietnam and the Ministry of Finance.
Right now, there aren’t any clear regulations, but how has the Vietnamese government dealt with crypto since Bitcoin (BTC) appeared in 2009?
Historical context of cryptocurrency regulations in Vietnam
One of the most surprising elements is Vietnam’s strong crypto adoption rate. The nation has regularly led the Global Crypto Adoption Rate Index. It was top in 2021 and 2022 during the COVID-19 bull run. Polling data revealed that 21% of Vietnamese consumers reported using or owning crypto.
Despite being such crypto lovers, the government’s stance on crypto in Vietnam has been playing catch-up since the sector bounced into the mainstream consciousness in 2017.
When Bitcoin first broke the $10,000 mark in 2017, the State Bank of Vietnam made its first regulatory move. Legislators declared crypto was not legal tender and prohibited using cryptocurrencies for payment.
Following this, the prime minister issued “Decision No. 1255/QD-TTg” to approve the plans to create a legal framework for managing virtual assets and digital currencies. But progress has been slow since then.
In 2018, the securities regulator strengthened its position and warned companies to avoid cryptocurrency activities after the central bank banned commercial banks from making crypto transactions.
Between 2019 and 2023, Vietnam focused on researching blockchain technology, developing business guidelines and balancing innovation with risk.
In 2024, the Ministry of Justice cleared up a gray area, explaining that owning cryptocurrency is not illegal and will not be banned. This comes ahead of the expected delivery of a framework to regulate cryptocurrency markets in 2025.
Did you know? In 2023, Vietnamese crypto investors reaped $1.18 billion in gains, making them the third largest crypto gainers behind only the United States and the United Kingdom.
Current legal status of cryptocurrency in Vietnam
The crypto legal status in Vietnam is murky. Currently, the State Bank of Vietnam prohibits issuing, distributing and using cryptocurrency as a payment method. That said, it’s not illegal to own or trade cryptocurrency.
Plans to develop a legal framework for regulation by May 2025 offer hope for clarity. This framework aims to address ownership and protect against criminal activity like money laundering.
It’s worth noting that without these regulations, there is nothing specific to distinguish between different types of digital assets like utility tokens, securities and currencies. Plus, if businesses are warned against operating with crypto, what does that mean for trading exchanges in Vietnam?
Government stance on cryptocurrency trading and exchanges
The government continues its cautious approach when it comes to Vietnam’s crypto trading rules and cryptocurrency exchanges.
Similar to crypto ownership, operating a digital asset exchange in Vietnam is in a legal gray area. It’s not strictly illegal, but there’s no solid legislation in place. That doesn’t make it a “free-for-all,” though, with traditional finance requirements still applicable.
Vietnamese crypto exchanges are still required to conduct the following:
- Know Your Customer (KYC) procedures,
- Anti-Money Laundering (AML) compliance,
- Regular financial reporting to authorities.
Crypto exchanges must also abide by advertising restrictions that focus on preventing misleading and unethical practices.
So, if you decide to start using an exchange to buy and trade crypto in Vietnam, what do you need to consider for the crypto tax laws in Vietnam?
Taxation of cryptocurrency in Vietnam
The lack of comprehensive crypto regulations also leaves taxation ambiguous.
In 2016, the Ministry of Finance issued guidance on crypto taxation. It stated that buying and selling digital currency is classified as a taxable commercial business activity. That means it is subject to value-added tax (VAT) and corporate income tax (CIT) for companies and personal income tax (PIT) for individuals. At that time, the interpretation was that digital currency was a moveable commodity and a form of property.
However, this guidance has since been subject to multiple legal disputes. The most significant of these came after a local Vietnamese tax authority issued a tax collection worth $6 million. This led to a lawsuit, and the court ruled that Bitcoin is not a means of payment or a recognized commodity, so it determined that BTC is not subject to taxes.
Bitcoin and other cryptocurrencies are not strictly taxable, as they remain in a legal loophole. The exact future treatment of crypto taxes is yet to be established. But as regulatory frameworks are introduced, likely, VAT, CIT, PIT and capital gains tax (CGT) could all come into play. This makes it important for individuals and companies to maintain detailed records of transactions while also consulting with a local tax professional.
Hold on, though. The lack of specific crypto regulation doesn’t mean it’s a lawless wild west of crypto… Traditional finance regulations still apply!
Cryptocurrency and Anti-Money Laundering (AML) regulations
To help monitor trading activity and restrict illegal activity, Vietnam has implemented AML regulations.
The main weapon for this is the strict implementation of KYC procedures. This means all users must register and verify their identity to use these platforms. For the government and legal authorities, this makes it easier to track the movement of fiat currency into cryptocurrency and vice versa.
To comply with AML, exchanges are required to:
- Collect and verify identities
- Report suspicious transactions
- Keep detailed transaction records.
Noncompliance with AML can lead to harsh penalties, including:
- Substantial fines
- Business operation suspension
- Criminal charges.
Did you know? Despite not recognizing crypto as an asset, a Vietnamese court sentenced two individuals to life in prison for a crypto theft worth 37 billion dong ($1.5 million).
Impact of cryptocurrency regulations on Vietnamese businesses and investors
The lack of clear regulation creates real problems for crypto startups and investors in the industry. While not illegal to own or trade, the fact that these digital assets sit outside of any established Vietnam crypto laws leaves potential adopters scratching their heads.
Navigating the crypto sector is a real challenge for startups and exchanges. It’s like driving with a blindfold on — you’re not sure what’s coming or where you’re going. Adding to this, the prohibited use of cryptocurrency as a payment method limits innovative blockchain business models, such as apps and non-fungible token (NFT) ecosystems that function using crypto micropayments.
It’s not all bad news, though; opportunities still exist. Vietnam is a burgeoning crypto nation with high adoption rates among its citizens. Many businesses, including large global exchanges such as Binance and Bybit, operate happily in the country.
With improved regulation to accompany the love of crypto, could this spark another level of adoption across Vietnam?
Recent developments and future outlook
Businesses and individuals should keep informed of upcoming changes. They will likely include AML measures, taxation policies and licensing requirements for crypto operations. Added clarity in classifying digital assets and improved oversight and reporting requirements are expected.
Now, to many Bitcoin maximalists, regulation is the enemy. However, for the average investor and business, it can have a positive impact on the crypto market.
Gracy Chen, managing director of Bitget, explained to Cointelegraph that clear regulation might “encourage broader adoption and lay the groundwork for increased retail and institutional engagement.”
Rather than sitting in this gray area, it is hoped that this Vietnam digital assets regulation will deliver:
- Increased legitimacy
- Explicit guidelines for businesses
- Clear tax classification
- More mainstream adoption.
Of course, there are two sides to every coin. Regulations might also introduce restrictions on certain digital assets and activities.
Plus, a tax on investments could make the industry less attractive to investors. Nobody likes taxes — a feeling not lost on other rival Asian nations.
Comparative analysis: Vietnam vs. other Asian countries
Despite leading crypto adoption rates, Vietnam is trailing other similar nations when it comes to regulation. This is a criticism often leveled at the government, but it could also be a strategic move to learn how other global cryptocurrency regulations evolve the industry before committing.
If you travel to Southeast Asia to Thailand, you’ll find one of the first countries to regulate crypto. The Thai Securities and Exchange Commission plays a major role in cryptocurrency’s legal status, monitoring businesses and reinforcing investor protections.
In addition, a 7% VAT has been removed from trading as the government pushes to make Thailand a global crypto trading hub. Although crypto is also banned there as a payment method for goods and services, it is still forward-thinking when it comes to Southeast Asia crypto regulations.
Further south in Singapore, crypto is not considered legal tender, but it can be used as a payment method if desired. In 2019, the Payment Services Act established a legal framework for “digital payment token providers,” or DPT. These regulations are often tightened as the industry evolves. The act requires DPT providers to implement several measures, including AML, customer due diligence and reporting suspicious transactions.
Will crypto become legal for payments or even considered legal tender in Vietnam? It’s unlikely in the near future. Governments around the world are still concerned that it risks moving the economy away from the local fiat currency, thereby destabilizing the economy. However, clear regulation could certainly make it another hub for crypto trading in Southeast Asia and increase cryptocurrency investment in Vietnam.
Did you know? Singapore has emerged as a model nation when it comes to adopting a regulatory framework. It has become a hotbed of crypto innovation and blockchain development.
Practical tips for navigating cryptocurrency regulations in Vietnam
Blockchain is still an emerging industry in Vietnam, necessitating continual updates and developments in cryptocurrency regulations. Both individuals and businesses should stay informed about these changes, especially up to 2025 when more comprehensive frameworks are expected.
Official resources like the Ministry of Finance are crucial for the latest updates. Cryptocurrency transactions for goods and services are currently prohibited in Vietnam, with noncompliance potentially leading to severe penalties.
It would be wise to keep detailed records of all crypto transactions and consult with a local tax expert to ensure compliance. Additionally, exercise caution when choosing exchanges, verifying their legitimacy and adherence to Vietnamese regulations. Remember, as regulations evolve, continual adjustment of practices is essential to remain compliant.
Written by Marcel Deer