Pilot cryptocurrency exchange: comprehensive and balanced approach

A pilot cryptocurrency exchange needs a comprehensive and balanced approach. (Photo: HAI NAM)

Dring a working session with the Central Strategic Policy Committee on economic growth objectives at the end of February 2025, Party General Secretary To Lam directed research into applying a controlled trial mechanism (sandbox) to establish an exchange for cryptocurrency as a virtual asset. The aim is to prevent negative impacts on the economy and social issues while also contributing value to the country's economy.

Lessons from international experiences

If the economy is likened to a river, then cryptocurrency is a new, rapidly flowing tributary carrying both opportunities and risks. This flow cannot be blocked, but without proper regulatory mechanisms, it could overflow and cause financial instability. The question is how to channel this "flow" to harness benefits while mitigating risks to the financial system.

There is still no global consensus on whether digital currencies should be classified as money, commodities, assets, or securities when forming legal frameworks. Some countries, such as China, strictly prohibit digital currency transactions due to concerns over financial control, economic stability, and political risks. Meanwhile, many other nations have adopted a more open stance.

In the US, the legal perspective on digital currencies varies depending on regulatory agencies and contexts. The US government does not recognise cryptocurrencies like Bitcoin as legal tender, meaning they cannot be used for tax or public debt payments.

However, the Financial Crimes Enforcement Network (FinCEN) under the US Department of the Treasury considers cryptocurrencies as "money" in specific cases related to anti-money laundering (AML) and counter-terrorism financing (CTF).

The Commodity Futures Trading Commission (CFTC) has officially classified Bitcoin and Ethereum as commodities since 2015. Meanwhile, the Internal Revenue Service (IRS) has considered digital currencies as assets rather than currency since 2014, making transactions such as buying, selling, exchanging, and mining subject to taxation as with other assets.

The US Securities and Exchange Commission (SEC) does not classify all digital currencies as securities. However, if a digital currency is issued through an initial coin offering (ICO) or has characteristics of an investment contract, it may be deemed a security.

With the rapid advancement of information technology, digital currencies are not merely a passing trend but may become an irreversible phenomenon.

Proposals for Vietnam

Regarding the acceptance of digital currencies among Vietnamese citizens, several international reports indicate that Vietnam has one of the highest rates of ownership and transactions involving digital currencies worldwide.

However, these figures are primarily estimated by foreign organisations based on online surveys. The Vietnam Blockchain Alliance cites statistics from various institutions indicating that digital asset inflows into Vietnam reached 105–120 USD billion in 2023.

One certainty is that the value of these virtual assets must be closely tied to the Vietnamese dong in some form of leverage when forming digital assets. Given the current data, Vietnam has an opportunity to shape this market rather than letting it develop spontaneously.

A controlled pilot mechanism for digital currencies should adopt a cautious yet pragmatic approach. Developing a legal framework is a significant task that cannot be completed overnight.

Therefore, alongside the pilot period (which is expected to last one to two years), ongoing evaluations and experience gathering are necessary for refining regulations. The exchange could be state-owned or operated by licensed private entities.

During the pilot phase, digital currency should be recognised only as an "asset," not as a means of payment. Transactions on the exchange should be conducted exclusively in Vietnamese dong, and investors should be allowed to open foreign currency accounts on the platform.

The use of foreign currencies or Vietnamese dong to trade international digital currencies (such as Bitcoin, Ethereum, Solana, etc.) should be regulated under foreign exchange management and anti-money laundering policies while maintaining a degree of flexibility in exchange operations.

Additionally, stringent anti-money laundering (AML) measures and Know Your Customer (KYC) procedures should be implemented to monitor transactions. However, blockchain technology inherently records all transactions permanently, allowing for traceability if appropriate monitoring tools are in place.

Vietnam's national population database, managed by the Ministry of Public Security, can be integrated with KYC procedures on the exchange. A fundamental factor in the success of a digital currency exchange is market and investor confidence. Thus, mechanisms to protect investors and ensure liquidity on the exchange are essential.

Information technology has been reshaping the world at an unprecedented pace. Each country must find its own approach to integrating into this new era. Within this broader context, digital currency exemplifies this transformation.

Approaching this entirely new issue requires a comprehensive and balanced perspective. If Vietnam's economy is viewed as a system, it must be managed appropriately to achieve an optimal state. Economic activities such as production, commerce, and trade form essential components of this system. Therefore, when establishing a digital currency exchange or, in the future, trading tokenised and digital assets, maintaining equilibrium between tangible currencies and tangible assets is vital.

Following the principle of "quantitative change leading to qualitative change", a controlled pilot of digital currency will mark a historical milestone, ushering in a new era of robust national development.