Central Bank Digital Currency: A Crypto Vision for Vietnam
Although blockchain technology has been known in Vietnam for a number of years, CBDC is still a new concept for the state bank and the responsible authorities. There has to be a long-term vision for the country, state FNF country director Andreas Stoffers and Doan Thanh Huyen in Hanoi. In preparation for the issuance of the Vietnamese digital dong, the country must implement legal reforms now.
Central bank digital currency (CBDC) is a new issue of interest of most central banks and economists and lawmakers in the world. In short, CBDC is a generic term for a version of currency that could use an electronic record or digital token to represent the digital form of a nation’s currency. CBDC is issued and managed directly by the central bank and could be circulated like a traditional currency. Many experts praise such a digital central bank money as innovative and profitable for the economy and society. Others see the danger that the centralized control can bring. In any case, blockchain technology has the ingredients to be a real game-changer.
As quoted by IMF, many central banks have started in-depth discussions on the appropriateness and feasibility of issuing CBDC, including but not limited European Central Bank, the US Federal Reserve. Some others have entered the phase of piloting their CBDC like the central banks of Sweden, Ukraine, and Bahamas. Especially China, the second largest economy in the world, has been testing the e-Yuan in practice in four major cities namely Shenzhen, Suzhou, Chengdu and Xiongan since April 2020. Next year, China will start a broad roll-out.
For Vietnam, the upheavals the blockchain-technology brings with it have a disruptive character for many areas of business, industry and society. China is the second largest export market of Vietnam, thus, the influence of the digital Yuan in the future to Vietnam’s economy, once it is widely used, can be foreseen. Appropriate preparation can help Vietnam properly respond in various circumstances.
Influence of the e-yuan on the Vietnamese economy
Thorough research on the influence of CBDC including the digital Yuan on Vietnam’s economy and how to react in the event that import of materials and goods from China switches to payment in digital Yuan is strongly recommended.
Within a market oriented economy, blockchain technology can be used in logistics to ensure that as soon as goods exported from Vietnam to the EU, for example, reach an agreed point and the QR code is scanned, the money (or the agreed partial amount) lands on the exporter’s account in milliseconds. Also conceivable is direct, smart-contract-based payment from machine to machine. For most of these applications, some forms of digital money are needed. Although a decentralized cryptocurrency such as Bitcoin is also conceivable in principle, most central banks including the State Bank of Vietnam (SBV) are cautious to let the reins be taken out of their hands here. In addition, a linking of the currency systems is necessary.
In Vietnam, although blockchain technology has been known for recent years, CBDC, however, is still a new concept to its State Bank and relevant authorities. There should be a long vision for the country to issue a digital Vietnam Dong, subject to specific conditions of the country, when CBDC becomes popular in the world economy.
Need for legal reform
The new form of CBDC results in various legal consequences. Thus, it raises important legal questions to both central banks and policymakers around the world. Many countries have developed their central bank laws and currency laws to empower their central bank a „mandate“ to issue CBDC.
The current legal framework of Vietnam provides that the State Bank of Vietnam is the only agency in the country issuing banknotes and metal coins of the Socialist Republic of Vietnam and is responsible for ensuring the sufficiency of banknotes and coins for the economy. As discussed above (an within the attached detailed article), to prepare for the issuance of digital Vietnamese Dong, the country should carry out legal reforms to broaden the mandate of its State Bank to digital currency issuance and circulation and recognize the digital form of the official currency and to establish legal provisions and standards for professional issuance and circulation of digital currency and use of it as a means of payment in the economy.
Andreas Stoffers is the country director for FNF in Vietnam
Doan Thanh Huyen is from International Trade Law Faculty, Hanoi Law University