The Southeast Asian nation of Vietnam now ranks among the top nations adopting cryptocurrencies. Indeed, the country has ranked first on Chainalysis’
The Southeast Asian nation of Vietnam now ranks among the top nations adopting cryptocurrencies. Indeed, the country has ranked first on Chainalysis’ Global Crypto Adoption Index for two years in a row.
Chainalysis’ research methodology took into account population-adjusted adoption in crypto platforms ranging from centralized exchanges to peer-to-peer (P2P) payment networks. Web traffic to major crypto networks was analyzed to determine countries with the highest interest and adoption percentages.
That said, Vietnam’s high adoption rate is a puzzling phenomenon, begging the question: Why is crypto adoption so high in the country?
No cryptocurrency taxes
There are numerous reasons why the crypto adoption rate in Vietnam is so high and one of them is that, unlike in the United States and other major jurisdictions where cryptocurrency holdings are taxed, there are no crypto taxes in Vietnam.
Right now, the Vietnamese government does not even recognize cryptocurrencies as legal tender. While the nation’s tax authorities have shown interest in taxing cryptocurrencies, they lack the mandate to designate them as taxable assets. As such, Vietnamese law is largely silent when it comes to crypto taxation.
Consequently, financial institutions in the country are barred from handling them. However, Vietnamese citizens are allowed to possess and trade crypto.
The lack of crypto taxes makes digital currencies ideal as investment instruments, hence the rise in adoption. The trade-off is that Vietnamese law doesn’t protect crypto users in the event of scams or losses. As such, cryptocurrencies cannot be used legally in trade relationships.
However, the nation’s financial regulatory agencies are working to come up with elaborate crypto usage guidelines. This is following a July 2021 directive issued by Prime Minister Phạm Minh Chính in which he asked the State Bank of Vietnam to explore the benefits and downsides of digital currencies with a view to draft regulations. The institution is likely to come up with a raft of measures that include tax and user protection guidelines.
Cointelegraph had the chance to speak with Gracy Chen, managing director of the Bitget cryptocurrency exchange, regarding Vietnam’s regulatory landscape and the developing situation.
According to Chen, clear and robust regulations would allow institutional inventors in the country to start dealing in crypto, and this would be a big win for the industry:
“When the regulation actually comes out, it may lead to a short-term impact on local fiat exchange trading, but in the longer term, clear regulation may encourage broader adoption and lay the groundwork for increased retail and institutional engagement since a better-regulated market will provide greater protection and increase trust of investors. So overall, the pros outweigh the cons.”
Vietnam has a huge unbanked population
Many Vietnamese have limited access to standard financial services. According to a 2021 study carried out by Statista, the country ranks second among the top 10 unbanked nations. The report highlights that about 69% of the citizenry lacks access to typical banking services.
World Bank estimates indicate that just over 61% of the country’s population resides in rural areas, where access to modern banking services is limited. This void is rapidly being filled by cryptocurrency networks. Novel revolutionary blockchain concepts such as decentralized finance (DeFi) are also gaining traction among Vietnamese crypto investors who wish to obtain credit for crypto investment purposes.
DeFi is a hypernym for blockchain-based financial networks that provide services similar to those offered by banks. DeFi platforms allow users to earn interest on their money, lend and borrow funds, as well as trade in crypto derivatives. They also enable investors to safeguard their assets using DeFi insurance and don’t require paperwork. This makes them convenient for unbanked Vietnamese, especially those who wish to scale their crypto investments and earn passive income.
Notably, Vietnam is ranked second among nations with the highest DeFi usage in the world, according to the 2021 Chainalysis Global DeFi Adoption Index report.
Remittances
In 2021, Vietnamese nationals living in the diaspora sent home over $18 billion in remittances, setting a new record, which made the country the eighth biggest remittance beneficiary in the world. This was a 3% increase from the $17.2 billion recorded in 2020.
For Vietnamese who regularly send money to their families in Vietnam, transfer fees are often exorbitant. The surcharges usually include administrative fees and exchange rates. According to World Bank statistics, remittance costs to Vietnam average about 7% as of 2020.
Exorbitant fees, in addition to the unbanked population’s lack of access to money transfer services, have made cryptocurrency transfers an appealing option for Vietnamese living abroad to help support their families back home….
cointelegraph.com