Vietnam’s Prime Minister has asked regulators to increase their vigilance on cryptocurrency transactions. This comes after protestors accused Modern Tech JSC, a company that reportedly raised 15 trillion dong in an ICO, of fraud.
The directive from the Prime Minister asks the central bank and other regulators to put more focus on the “management of activities related to Bitcoin and other cryptocurrencies.”
“Cryptocurrency investment and trading and raising money through initial coin offerings are evolving in a more complicated manner,” a statement on a government website said.s
The government seems to be worried cryptocurrencies may eclipse the existing financial system. In addition, it could affect the social order and pose risks to both individuals and corporates, the government said in a statement.
A government news agency has reported that authorities have asked the police to investigate Modern Tech JSC about the said ICO.
The police are however yet to commence investigations as they are awaiting official complaints from investors to be filed with them, Reuters reports. The company is allegedly behind the Ifan and Pincoin cryptocurrency. The amount raised is equivalent to $658 million.
Several fraudulent ICOs have previously been reported.
The directive instructs the Ministry of Public Security to detect and prevent money laundering and other criminal activities including terrorism financing.
Banks will also be asked not to facilitate illegal cryptocurrency transactions.
No Legal Framework
There is no regulation in place for cryptocurrencies in Vietnam but the Ministry of Justice is working on a legal framework to regulate the sector.
As far back as January, the deputy prime minister Vuong Dinh had asked the Ministry of Justice and the State Bank to work on regulations although it is not clear how far the process has gone.
The central bank has previously said that cryptocurrencies were not an accepted method of payment. It is still unclear whether the central bank treats it as an investment asset.
The decree effectively also banned issuance, supply and use of cryptocurrencies according to Asia Times.
Vietnam had been known to be permissive previously with some universities even accepting Bitcoin payments from foreign students. A large number of mining rigs have also been imported into the country without hindrance with the central bank saying regulating them was not part of its functions.
With the confusion, many players in the country largely operate in the dark.
Cryptocurrency activity is the most intense in the region with Japan and Korea being the leading lights.
The government there hopes to build a tech-driven economy and will want to strike a delicate balance between protecting investors while not stifling innovation.
A legal framework is also supposed to provide guidance on taxation. A court has previously ruled that authorities had no right to tax a trader who had amassed Bitcoin from trading as it was not considered an asset.
The country will now try to catch up with neighbours like China, South Korea and Japan which have made some steps towards regulating the sector. China has all but banned cryptocurrencies.
While it not clear which direction the regulations will take, government efforts elsewhere have often stemmed from fear.
Mark Carney of the Bank of England recently said that cryptocurrencies did not pose any threat to global financial stability. In a letter to the G20 summit, Carney noted that cryptocurrencies only accounted for 1% of the global GDP. He, however, like many finance ministers and central bank governors, raised concern about their potential use in money laundering and terrorism financing.
Members of the G20 summit are expected to present their proposals on regulating the sector in July.