Vietnam’s Prime Minister Calls for Pilot of Central Bank Backed Digital Currency

Vietnam’s Prime Minister Calls for Pilot of Central Bank Backed Digital Currency

by July 29, 2021

Vietnam’s Prime Minister Pham Minh Chinh is asking the State Bank of Vietnam (SBV) to study and carry out a pilot implementation for a digital currency powered by blockchain technology in the 2021-2023 period.

The surprise move came in the Prime Minister’s Decision 942, released in June which lays out a plan for digitizing the government by 2030 and directs the SBV to research, “develop, and pilot the use of virtual currency-based on blockchain technology.”

Binh Nguyen Thanh, coordinator at the RMIT University Vietnam’s Fintech-Crypto Hub, told Nikkei Asia that Decision 942 could open the door to the development of a central bank digital currency (CBDC). A CBDC would give the government control over a digital currency rather than leave it to a public, decentralized software or a private company.

Thanh expects to see the country form a task force of different agencies, including the SBV and the Justice Ministry, to collect information about blockchain and CBDCs. Vietnam has been contemplating the introduction of a fintech regulatory to allow companies to test innovative solutions in a controlled environment, and a digital currency pilot could be added to that, he said.

Huynh Phuoc Nghia, deputy director of the Institute of Innovation under the University of Economics Ho Chi Minh City (UEH), told Viet Nam News that it’s about time that the government starts looking more seriously into digital currency. “Digital money is an inevitable trend,” Nghia told the state-controlled media outlet. The pilot project will help the government better understand the pros and cons of a digital currency, and enable it to develop a more appropriate management mechanism.

Though cashless payments are increasing in Vietnam, the recognition of digital currencies by the SBV would help accelerate adoption, Nghia added.

Le Dat Chi, deputy head of the UEH’s Finance Faculty, cited a recent survey which found that most central banks around are piloting digital currency use, stating that Vietnam needed to keep up with international counterparts.

The decision from the government to pilot a digital currency backed by blockchain technology follows the establishment of a group to study virtual assets and cryptocurrencies back in April 2020. The research group, established by the Ministry of Finance, is responsible for proposing a legal framework and rules for activities involving cryptocurrencies.

There are currently no regulation about the issuance, trading and exchange of virtual assets and cryptocurrencies in Vietnam.

Digital currency powered by blockchain is among the core technologies Vietnam hopes to develop and master, alongside artificial intelligence (AI), big data, augmented reality and virtual reality and augmented reality (VR/AR) as part of building a digital government.

The e-Government development strategy aims for Vietnam to rank among the top 30 countries in the world in terms of digital government according to the United Nations (UN) ranking. It set out several key tasks including the development of a digital, cloud-first infrastructure, the launch of online public services, and the creation of a so-called National Data Exchange Platform (NDXP).

Adoption of digital payments in Vietnam has accelerated on the back of COVID-19. According to a recent study by Visa, over 85% of Vietnamese consumers have at least one mobile wallet or payment app, and over 42% use mobile contactless payments. In addition, 71% of consumers use mobile wallets or payment apps at least once a week.

Vietnamese expect the country’s transition to a cashless society to happen as soon as 2030, with the majority – 84% of respondents – already having attempted to go digital and get by without using cash.


Featured image credit: edited from Unsplash and Prime Minister Pham Minh Chinh By Cục An toàn thông tin – Bộ Thông tin và Truyền thông – Tóm tắt tiểu sử Thủ tướng Chính phủ Phạm Minh Chính, CC BY-SA 4.0