Việt Nam has set the deadline for the issuance of the legal framework on virtual asset as May 2025. — AFP/VNA Photo

It is necessary for Việt Nam to develop a legal framework on virtual assets (VA) which can manage traditional financial risks in combination with new technology developments, to ensure market transparency and protect users’ rights, experts said at a conference held by the Việt Nam Blockchain Association (VBA) on Wednesday.

Việt Nam has set May 2025 as the deadline for the issuance of the legal framework on VA under a national plan on preventing money laundering and combating terrorist financing and lifting Việt Nam out of the Financial Action Task Force (FATF)’s grey list.

Discussing the EU’s Markets in Crypto-Assets Regulation (MiCA) and Hong Kong Blockchain and Cryptocurrency Laws and Regulations, lawyer Nguyễn Trần Minh Quân said that these two legal frameworks, considered to be advanced, aim to protect users’ rights through licensing VA service providers (VASP). They address the issue of anti-money laundering and combating the financing of terrorism (AML/CFT) policies, ensure transparency and privacy of users and set strict operational standards.

Hong Kong Blockchain Association’s Co-founder Tony Tống said that the legal frameworks pose challenges to VASPs regarding increasing compliance costs, but also provide opportunities from consolidating trust, encouraging market participation and the development of the crypto asset ecosystem.

According to VBA, a number of unverified VASPs such as CrossFi, Mineplex, ALEO are raising capital from individual investors via their platforms. The operation of unlicensed platforms might violate regulations about personal data privacy.

The transactions of stablecoin, GameFi token and NFT and coin mining are currently not regulated in the established laws on taxation and anti-money laundering.

VBA’s Deputy President Phan Đức Trung said that the development of the legal framework on VA and VASP needs to be based on the combination of the practical experiences in risk management of the traditional finance and deep understanding of new technologies.

Basic compliance principles such as Know-Your-Customer (KYC), Know-Your-Business (KYB), Know-Your-Intermediary (KYI) and Know-Your-Transaction (KYT) should be applied in VA management to ensure users’ rights, system sustainability and promote innovation.

Trung stressed that it is critical to develop ethical standards, community standards and project standards, as well as promoting the application of regulatory technology (RegTech) to prevent frauds related to VA.

He pointed out that RegTech uses advanced technologies such as airtificial intelligence (AI), machine learning, BigData and blockchain to automate and optimise compliance of regulations and ensure transparency.

Trung added that gains from VA should also be taxed like winning a lottery.

Đỗ Ngọc Quỳnh, General Secretary of Việt Nam Bond Market Association, said that the VA market is developing rapidly in Việt Nam and globally VA inflow into Việt Nam in 2023, was estimated at US$120 billion.

VA should be considered one of creative innovations towards better meeting human needs, he said.

“The strong response and participation of users globally and in Việt Nam showed that this innovation has partly met the society’s development needs. Innovative ideas often precede legal framework development and bring both positive and negative impacts,” he said.

Regulations related to VA and VASP are divided across 19 legal documents. The lack of a consistent and complete legal framework leads to rampant unlicensed crowdfunding and marketing.

According to a study by the Atlantic Council (AC), as of December 2023, 32 out of 60 countries have officially legalised crypto assets.

Ten of the G20 countries, which together account for 50 per cent of the global gross domestic product (GDP), have officially issued regulations to manage VA and VASP.

The VA legal framework is attracting significant interests on a global scale. For example, in the US, about 50 bills relating to cryptocurrency are under consideration in different states. Some countries such as Switzerland have introduced Bitcoin into university education programmes.

Japan, the Republic of Korea, Singapore and Thailand, have established legal frameworks for VA and VASP.

According to data from Crypto payment gateway Triple-A, Việt Nam ranked second in the world of cryptocurrency ownership with 21.2 per cent of the population adopting crypto, second to the United Arab Emirates (UAE).

Blockchain research company Chainalysis’s data in March showed that crypto users in Việt Nam ranked third in the world in term of profits from trading in 2023 with a total gain of US$1.18 billion.

Early this year, a representative from the Ministry of Justice affirmed that cryptocurrency will not be banned in Việt Nam. The development of a legal framework is under way to ensure its on-track development and prevent risks.

Currently, the cryptocurrency transactions in Việt Nam are mostly implemented on international platforms or put-through transactions.

VBA’s statistics showed that the value of cyptocurrrencies Việt Nam received was estimated at nearly $91 billion by September 2023, of which, illegal transactions were worth around $956 million. — VNS