by Steven Jacob, Foreign Associate
On 3 March 2021, the Prime Minister of Vietnam issued a decision that authorized a pilot program for the use of mobile money in Vietnam. This is a major step forward in the use of non-physical currency in the country and marks a potential change in the direction of the government’s policies towards digital currencies. This article will examine the provisions of this new decision and the implications of mobile money in Vietnam.
Prior to this decision, the use of digital currency was not allowed in Vietnam. This prohibition was applied to all non-traditional means of payment including cryptocurrency, digital coins, and all forms of digital currency. Internationally, a customer can purchase digital tokens, or coins, and use those coins to purchase goods or services. This was not allowed. We have advised several clients on this issue and anyone wishing to offer the opportunity to “top-up” or otherwise create the ability to store value in a digital form was disappointed. They could only credit existing accounts, not provide digital tokens.
The decision of the Prime Minister, however, sets out a two-year pilot program for just that, digital tokens. But the purpose is not intended to be for purely commercial reasons. Only 63% of adults in Vietnam possess bank accounts and thus it is difficult for many citizens of the country to access the convenience and sources of goods and services provided online. However, there are nearly 130 million phones in the country (less than 100 million people). By allowing people to top-up accounts on their phones through payment at kiosks or minimarts, more people will be able to access the goods and services available online and in digital formats. This is designed to assist the people in “rural, mountainous, difficult, remote, border and island” regions. This is not simply for the convenience of sophisticated urban dwellers but for those people who don’t have access to banks or other existing methods of payment.
The pilot program is limited. Only businesses that already have intermediate payment service licenses for providing e-wallets, businesses with licenses to establish a public mobile land telecommunications network or specified subsidiaries can participate in the pilot program. Once they have registered for the pilot program they will only be able to offer limited services to users.
Users can sign up for the services using their mobile accounts. But they must demonstrate their identity in a Know Your Customer requirement through the provision of identity cards, citizen identification, or passports. They must also have a registered mobile account for at least three months prior to signing up for the service. These fairly stringent requirements seem intended to limit the opportunities for abuse and fraud.
The mobile money pilot program will be allowed throughout the territory of Vietnam, though priorities are those areas already mentioned: rural, remote, border and island regions. Mobile money will only be allowed to pay for goods domestically. There are no provisions for allowing cross-border payment.
Customers will be allowed to top up or withdraw from their Mobile Money accounts at physical kiosks, via bank accounts and e-wallets. They can also pay for goods and services at stores accepting Mobile Money.
In addition, money transfers between customers’ Mobile Money accounts will be supported. There is a maximum cap set on the total transactions allowed to minimize the risks of digital piracy and other abuses. In any given month, a single user can only transact up to VND10 million for all transactions, including withdrawals, transfers, and payments.
Businesses providing mobile money services must open a security bank account and guarantee that there is enough money in the account to cover the amount of mobile money outstanding at any given time. Businesses must also develop a system that allows government authorities to check the amount of mobile money in circulation against the amount of money in the bank account. Additional requirements are in place for prevention of money laundering and the protection of customer’s data.
Businesses must put in place safeguards, technology, and training for personnel at points of deposit and withdrawal. They must also put in place reporting and notification protocols for informing customers of their obligations and rights regarding the mobile money and comply with consumer protection principles. Additional guidelines are given for the purposes of technical standards and requirements regarding the method of monitoring individual accounts. Responsibilities of various government bodies are set forth and the two year pilot program time limit will begin once the first mobile money business receives authorization for its provision.
This is a major milestone for the development of digital technologies. Paired with the continuing news that the government is investigating the possibility of allowing cryptocurrencies, this demonstrates that they are no longer sticking their head in the sand when it comes to digital monies. Not only will this allow for a broad range of unbanked individuals to have access to goods and services only available online, which will also provide an expanded customer base for domestic merchants, but it will allow for the deployment of new technologies to serve those individuals.
Vietnam has long had a cash-based economy and the idea of being able to convert that cash into digital form without having to open a bank account or have the financial reputation necessary to obtain credit will drastically expand the purchasing power of the unbanked. It will also have the knock-on effect of providing sophisticated city dwellers the ability to buy digital tokens and participate in online games and other luxury behaviors that were previously not allowed. It will benefit rural and urban, consumer and merchant alike.