In 2009, Bitcoin, the first decentralized digital currency, was implemented using blockchain technology — a public, transparent, and distributed database which is secure from revision and tampering. Transactions via this medium are processed directly between two parties — without passing through a third party, thereby keeping transaction costs low to nonexistent.
However, it would not be until late 2013 when Bitcoin made its way to Vietnam via Bitcoin Vietnam, in eventual cooperation with Bits of Gold, an Israeli startup. Since March 2014, Bitcoin Vietnam has overseen the trade of over 4,400 Bitcoins by more than 29,000 users.
Led by Nguyen Tran Bao Phuong, co-founder and CEO of Bitcoin Vietnam and fellow co-founders Dominik Weil, Phil Trinh, and Aleksander Winter — the six-person multinational team is spread across Europe and Asia. The 100 percent locally-owned company has pioneered the adoption of Bitcoin in Vietnam since early 2014 — but not without overcoming some hurdles along the way.
A rough start
In early 2014, local businesses (online retailers and cafes) in Vietnam began publicly announcing their acceptance of Bitcoin as a form of payment. In February of that year, there was finally enough global activity around Bitcoin to prompt the State Bank of Vietnam (SBV) to release a statement on the digital currency.
In an official statement, the SBV identified the anonymous nature of Bitcoin exchanges and transactions as a potential conduit for illegal activities (money laundering, illegal narcotics, tax evasion, etc.).
Furthermore, the SBV cited the security issues (hacking, theft, compromised exchange database integrity, or disruption of trade services) which plagued several exchanges during this time, most notably Mt. Gox (now defunct) and BitStamp.
Additionally, the SBV identified the volatile and unpredictable nature of the value of Bitcoin as a danger for investors and declared the digital currency a “bubble.” (Currently, one Bitcoin is valued at over US$2700 — but the value has fluctuated wildly in recent years.)
The SBV also stated that since the currency was not regulated by a country or institution, it would be the investors who would bear the brunt of any fallout concerning Bitcoin — and thus, expressly warned organizations and individuals in Vietnam against investing, using, keeping, or using services connected to Bitcoin and other cryptocurrencies.
Moreover, the SBV noted that Bitcoin and other digital currencies were not legal forms of payment or settlement. In this climate, Vietnam Bitcoin and Bit2C, another Israeli company, joined forces in June 2014 to found VBTC, Vietnam’s first Bitcoin exchange.
In essence, Bit2C would provide its Israeli technology as the foundation of the platform, and Vietnam Bitcoin would provide its local market know-how. This was in addition to strict self-regulation regarding Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance. Both Vietnam Bitcoin and VBTC are subsidiaries of seabit, a Singaporean holding company whose shareholders include the founding team of Bitcoin Vietnam and VBTC.
A few days after the exchange went live in July, the Head of the SBV Payment Department, Bui Quang Tien announced to the local press that the SBV would work with the Ministry of Public Security (MPS) to detain the operators of VBTC — the real-time Bitcoin exchange — because it was operating without a license.
However, the Bitcoin Vietnam team publicly clarified the situation soon after (without experiencing a service interruption) and has been in constant dialogue with various Vietnamese government agencies since May 2014.
According to Dominik Weil, co-founder of Bitcoin Vietnam, “The whole situation was based on a misunderstanding back in those days — and the relationship between all participants has improved tremendously over the last several years of cooperation.”
In August 2014, Bitcoin Saigon, a local meet up group, was launched by members of Bitcoin Vietnam and other local Bitcoin community enthusiasts. It aims to “to build a strong and dynamic community of digital currency enthusiasts and supporters,” according to its Facebook page.
At the end of 2014, VBTC experimented with Vietnam’s first Bitcoin margin trading platform, called VBTC Plus, via partnership with Coinarch (a white-label platform, now defunct). Vietnam Bitcoin acted as VBTC Plus’ Vietnamese Bitcoin wallet provider. However, there was not enough customer interest in VBTC Plus after a trial period, so the team focused its resources elsewhere.
A new beginning
In June 2015, Bitcoin Vietnam launched its Cash2VN service, which performed international remittances into Vietnam using Bitcoin for a flat fee of US$2.00 per transaction. Last month, the service processed more than US$100,000 in remittances for the first time. Payouts are made in Vietnamese Dong due to local foreign currency regulations.
The following month, Bitcoin made another breakthrough in Vietnam when Future.Travel, a Ho Chi Minh City-based travel agency, became the first company in Vietnam to accept Bitcoin as payment for travel activities (flights, tours, cruises, etc.) and hotel accommodations.
That same month, the Law on Enterprise 2014 (LOE 2014) came into effect on July 1. According to DFDL, “Under LOE 2014, an enterprise is free, in principle, to conduct any business activities which are not prohibited by the law.” Proponents of Bitcoin in Vietnam cite this law to support their claim that using Bitcoin is not illegal since there is no law in Vietnam governing the use of Bitcoin (i.e., it is unregulated and unrestricted).
In September 2015, the VBTC relaunched its exchange after a five-month hiatus in partnership with Blinktrade, a New York-based technology provider and implemented BitGo as its wallet solution, requiring signatures from the three parties.
As part of the relaunch, VBTC also enabled Bitcoin remittance services for Vietnam’s unbanked and underbanked populations in over 9,000 locations, allowing Vietnamese nationals to pick up Bitcoin-to-cash remittances at their local bank. (Remittances to Vietnam were in excess of US$12 billion in 2015.)
In January 2016, Bitcoin Vietnam partnered with Coinify, a Danish company, to launch the first blockchain payment processing platform for Vietnam. The partnership enables Vietnamese merchants to receive payments in Bitcoin or 16 other blockchain currencies supported by Coinify.
Payments are facilitated via an API or plugin on the merchant’s website with an available Point-Of-Sale (POS) application for brick-and-mortar stores. The digital currencies are converted to Vietnamese Dong and paid out to the merchants in regular intervals.
In March 2016, the Vietnam E-commerce and Information Technology Agency (VECITA), a body of the Ministry of Industry and Trade (MOIT) issued a warning to Vietnamese consumers and investors about the dangers of Bitcoin and other digital currencies due a rise in fraud complaints.
In June 2016, BlockFin Asia, the first major blockchain and Bitcoin conference in Vietnam, was held in Ho Chi Minh City. The two-day event brought together prominent Blockchain advocates from around the world to share insight and to address some of the challenges and potential solutions for Vietnam’s market.
During the conference, David Watson, CEO of Future.Travel revealed that “All of our Bitcoin transactions are actually coming from people outside [Vietnam] who are sending money into Vietnam.” In other words, not one single payment — originating from Vietnam — was made in Bitcoin in the year since Future.Travel offered payment in Bitcoin as an option.
Also, Vietnam’s first Bitcoin ATM was announced during the conference, allowing users to buy and sell Bitcoins in Ho Chi Minh City’s District 1. (The ATM was sourced in North American via BitAccess, a Y Combinator-funded startup.) According to Bitcoin Vietnam, as of October 2016, the ATM averages five daily transactions, with most consumers preferring to sell Bitcoins to buying them at a 10:1 ratio.
Bitcoin at a Vietnamese intersection
Unfortunately, not all of Bitcoin’s recent history in Vietnam is without concern. There have been recent reports of Vietnamese speculators borrowing up to US$200,000 to invest in Bitcoin. When Bitcoin prices dropped by 30 percent in August 2016 due to a security breach at a major Bitcoin exchange, losses for one investor totaled US$50,000 due to the cascading effects.
And in September 2016, the most significant Bitcoin scam to date emerged in Vietnam’s Gia Lai province located in the Central Highlands. Prompted by initial extraordinary returns after a few days, as many as 2,000 people — including farmers — invested into the pyramid scheme which eventually totaled more than US$1 million in losses. (The per capita GDP in Vietnam is approximately $2,000.)
According to local press, some participants took out bank loans to convert the local currency into Bitcoin for speculation purposes.
If Vietnamese farmers are trying to get in on Bitcoin, that means the cryptocurrency is moving into the mainstream — but these negative developments may also create more apprehension about digital currencies in the public domain, especially for policymakers and regulators in Hanoi.
Still, Bitcoin and its underlying blockchain technology are off to a surprisingly strong start in Vietnam (for less than three years), buoyed by the unbanked and remittance opportunities in this Southeast Asian country of more than 90 million people. According to Phil Trinh, co-founder of Bitcoin Vietnam, “For Vietnam, I see that currently the adoption of blockchain is mostly [staying] at the level of using it as Bitcoin, as a currency for speculation, for payment service … but we expect that the application of blockchain is going to be improved later on.”
It will be some time before we start to see more sophisticated applications of blockchain technology in Vietnam (perhaps in the form of smart contracts). If Bitcoin scams and speculation of the digital currency continue, then fear may delay Blockchain technology from taking a significant foothold in this US$199 billion market.
Ultimately, education and reputable information on digital currencies (and its underlying technology) for consumers can counter this risk — but it requires time, effort, and capital to do so. For now, it looks like Bitcoin Vietnam is leading such initiatives — and thus will reap the future rewards.
This article was originally published on Tech In Asia in October 2016 under a different headline. At the time of publishing, one Bitcoin was valued at over US$600.