Vietnam has seen an estimated influx of hundreds of billions of dollars in cryptocurrencies over the past year. However, the absence of a robust legal framework to monitor these capital flows could result in tax losses and risks such as money laundering.
Lina Nguyen, Business Development Director at Exness Investment Bank, stated that the dormant phase of cryptocurrencies has ended. She noted that positive signals are increasingly evident, with more institutional investors entering the market. Nguyen predicted that investment in digital assets will continue to rise, with financial institutions showing interest despite retail investors remaining cautious.
In the first few months of this year alone, over $1.2 trillion USD has been invested in digital asset exchange-traded funds (ETFs). According to the US blockchain analysis firm Chainalysis, the positive trend in the cryptocurrency market observed in 2023 is expected to extend into 2024, driven by the US approval of spot Bitcoin ETFs and increasing participation from institutional investors.
Vietnam ranks third globally in the number of cryptocurrency holders. Data from Crypto Crunch App indicates that 26 million people in the country own cryptocurrencies, five times the number of local stock trading accounts. Research by Dr. Nguyen Nhat Minh and Dr. Thai Trung Hieu from RMIT University shows that cryptocurrency owners in Vietnam are demographically diverse, including young, highly skilled workers, tech enthusiasts, and small business owners seeking alternative investments.
Chainalysis reports that up to $120 billion USD in cryptocurrencies entered Vietnam within the year leading up to June 2023. Vietnamese investors netted $1.18 billion USD in profits last year, placing the nation among the top five Asian markets with the highest returns from cryptocurrency investments, alongside China, Indonesia, India, and the Republic of Korea.
Dr. Pham Anh Khoi, Vice Chairman of the Fintech Application Committee at the Vietnam Blockchain Association, cited a report by Boston Consulting Group estimating that the global market for tokenized real-world assets (RWA) could reach $16 trillion USD, or 10% of global GDP, by 2030. Standard Chartered predicts this market could double to $30 trillion USD in the following four years.
Digital assets, particularly RWAs, offer low-cost, efficient funding channels for projects with tangible assets, presenting a valuable opportunity for developing countries like Vietnam to engage in the global capital market. The influx of cryptocurrency over the past year was nearly five times greater than foreign direct investment (FDI) inflows into the country.
While digital assets provide an attractive investment and fundraising channel, offering portfolio diversification for investors and funds, they also carry high risks due to significant volatility. The market has a high incidence of fraudulent projects, making it unsuitable for uninformed investors.
Experts emphasize the urgent need for a legal framework to harness the potential of the digital asset market. If appropriate management policies are enacted, these funds could contribute positively to economic growth rather than being lost to the shadow economy, according to Khoi.
As interest in owning and investing in digital assets grows, consumer protection regulations and market transparency become increasingly necessary. This includes measures to prevent fraud and combat cyber threats. Implementing strict regulations to protect consumers could help build investor confidence and encourage broader participation in the crypto asset market.
Moreover, an unregulated cryptocurrency market could pose financial stability risks in Vietnam. Without proper oversight, crimes such as money laundering and terrorism financing could emerge.
Related topics:
