Vietnam, a Southeast Asian country, is now among the top countries that have adopted cryptocurrency. The country is first in Chainalysis’ Global Crypto Adoption Index, for two consecutive years.
Chainalysis took population-adjusted adopters into consideration when researching crypto platforms. These could be centralized exchanges or peer to peer (P2P), or payment networks. To determine which countries have the highest adoption and interest in crypto networks, we analysed their web traffic.
However, Vietnam’s high adoption rates are a puzzlement, raising the question: What is the secret to crypto adoption in Vietnam?
There are no cryptocurrency taxes
There are many reasons why crypto adoption in Vietnam is so high. One reason is that unlike the United States and other major jurisdictions, where cryptocurrency holdings can be taxed in these countries, Vietnam does not have crypto taxes.
The Vietnamese government doesn’t recognize cryptocurrency legal tender at the moment. Although the tax authorities of the country have expressed interest in taxing cryptocurrency, they do not have the authority to declare them as taxable assets. The law in Vietnam is silent on crypto taxation.
Therefore, banks and financial institutions are prohibited from dealing with them. But, crypto is allowed to be owned and traded by Vietnamese citizens.
Digital currencies are becoming more popular because they don’t have to be taxed. However, Vietnamese law does not protect crypto users from losses or scams. Therefore, cryptocurrencies can’t be legally used in trade relationships.
The nation’s financial regulator agencies are currently working on elaborate guidelines for crypto use. This follows a directive from Prime Minister Pham Minh Chinh dated July 20,21 in which he requested the State Bank of Vietnam examine the advantages and disadvantages of digital currency with the aim of drafting regulations. It is expected that the institution will come up with a number of measures, including tax and user protection guidelines.
Cointelegraph was able to talk with Gracy Chen (Managing Director of Bitget’s cryptocurrency exchange) about Vietnam’s regulatory landscape, and the current situation.
Chen believes that clear regulations and strong regulation would enable institutional inventors to begin dealing in crypto in the country. This would be a huge win for the sector.
“When regulation is actually published, it may have a short-term effect on local fiat currency trading. But in the long-term, clear regulation will encourage wider adoption and lay the foundation for increased retail engagement and institutional involvement since a better-regulated marketplace will offer greater protection and increase investor trust. Overall, the benefits outweigh any cons.
Vietnam has a large unbanked population
Many Vietnamese lack access to standard financial services. Statista’s 2021 study found that Vietnam ranks second in the top 10 unbanked countries. This report shows that 69% of citizens lack access to traditional banking services.
The indicate World Bank has estimated that 61% of the country’s population lives in rural areas. These areas are difficult to access modern banking services. These gaps are being quickly filled by cryptocurrency networks. Vietnamese crypto investors are increasingly attracted to innovative blockchain concepts like Decentralized Finance (DeFi). These new concepts are a great way to get credit for crypto investment.
DeFi is a term for blockchain-based financial networks, which offer services similar to banks. Users can earn interest on their money, lend or borrow money, and trade in crypto derivatives. DeFi platforms don’t require any paperwork and allow investors to protect their assets with DeFi insurance. They are convenient for Vietnamese who don’t have bank accounts, and especially those who want to increase their crypto investments and make passive income.
Notably, Vietnam ranks second in the list of countries with the highest DeFi usage, according to the 2021 Chainalysis Global DeFi Adoption Index.
The country became the eighth largest remittance beneficiary worldwide when Vietnamese citizens living in the diaspora sent more than $18 billion to home in 2021. This is a 33% increase over the $17.2 million recorded in 2020.
Transfer fees can be exorbitant for Vietnamese who send money regularly to their family in Vietnam. Surcharges can include exchange rates and administrative fees. As per World Bank statistics, the average remittance cost to Vietnam is about 7%.
In order to support their families back home, Vietnamese living abroad have found cryptocurrency transfers a popular option due to high fees and the inability to transfer money to the banked population.
Although blockchains can charge transaction fees, these fees are often lower than those charged by remittance network. They also have P2P capabilities and don’t require a middleman to complete transactions.
GameFi is gaining popularity
GameFi , also known as Blockchain Games with Financial Incentives, use innovative economic models that enable users to earn rewards while they play. Rewards are often in the form nonfungible tokens, NFTs, and cryptocurrencies.
Many gamers are familiar with cryptocurrency and can use them to help them adopt.
75% of GameFi crypto-investors said they began investing in digital currencies in August’s State of GameFi 2022 Survey by Chainplay.
GameFi, particularly play-to-earn games (P2E), are hugely popular in Vietnam. They have greatly contributed to cryptocurrency adoption in that country.
A 2021 research report by data aggregation services Finder ranks Vietnam sixth in the list of countries that have the highest number of P2E gamers. The survey found that 23% of Vietnamese respondents said they have played P2E games at one time.
Many GameFi startups are now operating in the country because of the widespread NFT gaming culture. This is driving crypto adoption. Summoners Arena, Ancient8, Sipher, and Ancient8 are some of the developers.
Axie Infinity is a popular game that allows you to earn money by playing. Its roots are in Vietnam.
Chen stated that GameFi and crypto adoption are two reasons why both sectors are flourishing.
According to Data.ai and Sensor Tower data, Vietnam is the first country in Southeast Asia that produces apps and games for stores like Apple Store or Google Play. GameFi was also responsible for the huge increase in crypto adoption around the globe last year. These two factors are strongly connected, resulting in massive crypto adoptions in Vietnam.
As a hedge against inflation, cryptocurrencies
In times of economic turmoil or hyperinflation, Vietnamese citizens have always preferred to use other national currencies, such as the United States Dollar. To hedge against inflation, Vietnamese have been increasing their holdings of assets like gold in recent years.
In the last decade, some Vietnamese citizens had as much as 400 tonnes of gold.
The emergence of cryptocurrency has led to more Vietnamese citizens using them as a hedge against inflation rather than tangible assets like gold.
Although the Vietnamese central bank has cautioned individuals and institutions about dealing with virtual currencies due their mercurial natures, the declining faith in the Vietnamese dolma has seen more Vietnamese investors turn to digital currencies. According Statista data, Bitcoin ( Bitcoin) is the most widely used cryptocurrency in the country. It is used as an inflation hedge by investors.
According to the report, the search interest in the country’s prime cryptocurrency is at around 84.5% compared to other cryptocurrencies.
As more Vietnamese realize the benefits of digital assets, crypto adoption is expected to continue in Vietnam. However, regulations are still a ways off. The State Bank of Vietnam has until February 2023 to examine the pros and cons of cryptocurrency and make policy recommendations.