All right, one more blog post about cryptocurrency. A little over a week ago, the Ho Chi Minh City police announced they busted a major gambling ring (see article from Bloomberg here). They arrested 59 people and confiscated 40 laptops, over 70 cell phones, ATM cards, and over 130,000USD worth of Vietnamese Dong. The gambling ring involved two websites that required the use of a specific e-wallet to buy two types of cryptocurrency. Once there were a large number of bettors playing on the sites the operators would crash the site and collect the money from the e-wallets of the bettors. Ostensibly, the two sites in question claimed to be linked to international gaming site Evolution.com, but the head of that site refutes such claims. In total, the ring saw a movement of 3.8 billion USD during its lifetime.
The targets were apparently Vietnamese and southeast Asian gamblers. While I’ve mentioned repeatedly that cryptocurrency is not allowed as a form of legal tender in Vietnam, and banks and bank card providers are encouraged to report transactions linked to cryptocurrency purchases, there remain numerous ways for Vietnamese citizens to buy cryptocurrency.
E-wallets, whether based in Vietnam or elsewhere, are not, technically, cryptocurrency. There is no restriction for buying into an e-wallet as they can be used for more than simply purchasing crypto. But once money is in an e-wallet it can easily be used to purchase crypto, which seems to be the route many Vietnamese who own crypto assets have taken.
This flow of funds is technically legal so long as the Vietnamese resident does not try to use the cryptocurrency as a legal tender in Vietnam. There is also a group of academics who suggest that tokens and cryptocurrency can be deemed to be an asset under the laws of Vietnam, despite what several lawyers have to say (see article from VASS in Vietnamese here). If that is the case, then cryptocurrency can technically be held by Vietnamese citizens, even though they can’t use it to buy anything in Vietnam. They can still use it to make purchases cross-border and internationally. They can also use it as a parking lot for value, one which—from recent history—has demonstrated a growth rate much larger than the best fixed-rate available at Vietnamese banks.
But cryptocurrency remains open to abuse.
As demonstrated by this gambling ring and the way in which the operators would essentially lure in hapless Viets and then steal their money, there remain a large number of opportunities for fraud and theft of cryptocurrency, especially in an economy where there is no regulation of the sector.
Again I reiterate my strong suggestion that the Vietnamese government create legislation to regulate cryptocurrency. It will not only assist in the prevention of crypto fraud, the financing of terrorism, and money laundering, but it will also allow the government to reap funds through taxing crypto transactions. Is this not a desirable end if you’re a government? Would it not be best to put in place protections for your citizens that will, at the same time, serve as fundraisers for the government’s coffers?
But I digress. . .
Cryptocurrency is, by its nature, anonymous. The only link evidencing the possession of cryptocurrency is through the digital address of the e-wallet that contains the crypto. From my understanding, it is even possible to print out the code for cryptocurrency and hold the asset completely separate from the internet. This means that cryptocurrency is at least as anonymous as hard cash, possibly less so as cash has discreet serial numbers and can be traced while there are currently no legal methods for piercing the veil of an e-wallet linked to a crypto account.
That said, unlike cryptocurrency, e-wallet providers are backed by corporate entities which are subject to Know Your Client (KYC) requirements. A corporation can be served process and required to reveal the personal information of its clients by law enforcement under the right circumstances. I’m not aware of any particular incidents of this occurring, but it theoretically would allow for governments in the jurisdictions of the companies that operate e-wallets to access the identities and locations of the owners of cryptocurrency.
But for Vietnam to access that information, to identify who is using cryptocurrency for nefarious purposes, they would have to either authorize e-wallets in Vietnam to allow the purchase of crypto or enter into agreements with the countries in which those e-wallets are based for judicial cooperation. Neither of which seems likely at this point in time.
The best option would be for Vietnam to license its own e-wallets and allow its citizens to use them to purchase cryptocurrencies. That way they would have access to the companies that operate the e-wallets and could compel disclosure of the identities of the e-wallet holders should they be linked to illegal activity. But even this would require either the development of homegrown cryptocurrencies to prevent the outflow of foreign exchange, or the unregulated exchange of foreign currency to pay for foreign cryptocurrencies. Again, neither of these appear likely.
In conclusion, then, while the government and the people of Vietnam might benefit greatly from the regulation and oversight of cryptocurrency trading in its territory, there remain too many ancillary changes necessary to make it likely for the government to take action anytime soon. Until the leaders of the country are willing to liberalize more than just crypto, I doubt we will see any effective legislation coming out of the National Assembly of government.