Prime Minister of Vietnam asks State Bank to trial a CBDC pilot on blockchain

As local news reported, the Vietnamese Prime Minister Phạm Minh Chính has ordered the State Bank of Vietnam to study the feasibility and test the operationality of a pilot for a digital currency (CBDC). Unlike other countries, Vietnam is looking to test a digital currency built on blockchain technology, not a centralized protocol.

According to a Viet Nam News report on July 3, Prime Minister Phạm Minh Chính announced works on the CBDC as part of his wider strategy of the e-government development. As expected, the Vietnamese central bank will conduct the pilot development and implementation from 2021 to 2023.

Vietnamese officials’ adoption of blockchain technology is unlike their hostility to the decentralized currencies based on that protocols. In 2018, Vietnam had banned Bitcoin as a means of payment, keeping only the rights of private investments in crypto.

Later followed a directive to restrict crypto-related services in credit institutions over money laundering risks. Despiting that, there has no formal regulatory framework for crypto exchanges operating in the country.

However, that hostile approach has begun to shift after 2020. This May, the Vietnamese Ministry of Finance established a research group to study and make policy proposals concerning cryptocurrencies and digital assets. The group includes the country’s State Bank, securities regulator, the Department of Banking and Financial Institutions, the General Department of Vietnam Customs.

As told reporters Huỳnh Phước Nghĩa, the deputy director of the Institute of Innovation at the University of Economics Ho Chi Minh City (UEH), as the growth of cashless payments in Vietnam continues, recognition of digital currencies by the State Bank would help the further acceleration of this process. By his words, “digital money is an inevitable trend,” and conducting the pilot would help the government assort the pros and cons of various approaches and to select proper management methods.

In another interview, Lê Đạt Chí, a deputy head of UEH’s Finance Faculty, emphasized that acting fast would be necessary for the country to be competitive as momentum behind CBDCs continues to grow.

Viet Nam News claims that in a global financial system dominated by the U.S. dollar, euro, and yen, a CBDC issuance could be useful for smaller countries.

In addition, Chí called for an acceleration of CBDC development, pointing to potential risks for the country’s financial security. At the time, a representative of NextTech Group of Technopreneurs, a group of e-commerce companies of Southeast Asia, claimed that Vietnam must determine an official definition for cryptocurrency.

Before the government settled its research group, the Vietnamese police officials called citizens to avoid the crypto investment activity. In March 2021, the Ministry of Finance warned the public about the risks of crypto investment over the unregulated status of the industry.