Vietnam to pilot central bank digital currency
00:57, 13 July 2021
Vietnam is the latest Asian state to experiment with a digital currency project, reversing a long-standing rejection of cryptocurrencies by the country’s authorities.
The news was buried near the bottom of Prime Minister Decision 942, which was released in June and outlines the government’s digital strategy up to 2030.
According to Nikkei Asia, which reported the news, Decision 942 commands the central bank to “develop, and pilot the use of virtual currency based on blockchain technology”.
Digital reverse
Law firm Dezan Shira & Associates says the digital currency pilot will be complete by 2023.
The move represents a turnaround for digital currencies in Vietnam. The State Bank of Vietnam (SBV) has previously ruled bitcoin, and cryptocurrency iterations, as illegal for use in domestic transactions – breach of this rule leaves users liable to a fine of up to $8,700.
Conversely, trading cryptocurrencies is tolerated.
The rise of cryptocurrencies in Vietnam has been associated with scams and frauds. The most high profile is Modern Tech – a Ho Chi Minh City firm that ripped off 32,000 investors for a total VND15trn ($660m) over non-existent cryptocurrency projects.
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What is a CBDC?
Essentially a CBDC is a state-backed form of private sector digital tokens such as BTC and ETH, and are built using the same underlying blockchain technology.
ETH to the US dollar
There are two types of CBDC, wholesale and retail. Wholesale CBDC are designed to transfer payments between countries, such as the Bank of International Settlements (BIS) Project m-Bridge.
This is a tie-up between Hong Kong, Thailand, China and the United Arab Emirates.
Retail CBDCs, like China’s e-yuan are intended to be used domestically and are most useful for countries with underdeveloped financial markets.
Asian CBDCs
Asian countries have been the most enthusiastic adopters of state-backed digital currencies, most commonly referred to as Central Bank Digital Currencies (CBDCs).
On 8 June Hong Kong authorities announced the launch of the e-Hong Kong dollar
In October 2020 Cambodia launched a retail CBDC called the digital bakong
In May this year Indonesia announced plans for a retail CBDC
In the same month South Korea moved towards a CBDC pilot
China has dispersed over $40m to citizens as part of its digital yuan trial
In April the Bank of Japan started a one-year CBDC trial, however it ended this in 2022, citing a lack of public interest
In June the Bank of Thailand contracted a German payment firm as part of its CBDC experiment
In November 2020, the Reserve Bank of Australia started a CBDC research project, however, as with Japan it see a weak case for a retail CBDC
In June 2022, Taiwan announced plans for both a retail and a wholesale CBDC
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CBDCs outside of Asia
While Asian markets are - generally - most advanced in developed CBDCs, particularly retail versions other economies are looking at the issues.
The US President Joe Biden announced in March that the world’s largest economy would pilot a CBDC.
At the other end of the economic scale, the Austrian central bank launched Project Delphi which aims to develop a wholesale CBDC.
A digital euro?
Even the normally conservative European Central Bank is making cautious noises about a digital euro.
However, in a July 2022 blog post the ECB said there are still several hurdles to climb for a digital currency to succeed within the trading bloc.
“The digital euro can only be successful if it becomes part of the everyday lives of Europeans.
It must add value compared with existing solutions. What will that take? It is too early to decide on the details of the design,” the ECB said.
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