Introduction
Financial technology, or mainly known as Fintech has been a booming industry ever since the strike of Covid-19 when contactless transactions were the only means of dealing. It has become more convenient for every one of every age as everything is mostly one tap away. However, with how simple Fintech has become it can very easily get out of hand without proper supervision. Hence come into play the regulations governing financial technology. Different countries regulate on different playbooks.
This seven part series will highlight Fintech Regulations in several countries within Asia Pacific, namely:
- Malaysia;
- Philippines;
- Taiwan;
- Vietnam;
- Singapore;
- Thailand; and
- Korea.
Series: Vietnam
Vietnam
Vietnam’s fintech and digital asset regulatory landscape is dynamic and evolving. Unlike some countries with comprehensive regulatory frameworks, Vietnam’s approach is nuanced and contingent on the specific nature of the fintech business. This part will explore the multifaceted regulatory landscape in Vietnam, touching on key areas and the challenges posed by technological innovation outpacing regulation.
Sectoral Regulations and Technological Evolution: Vietnam’s regulatory framework for fintech and digital assets is characterised by its sectoral approach. The applicable regulations are determined by the nature of the underlying business, often aligned with the Vietnam Standard Industrial Classification (VSIC). This approach reflects Vietnam’s commitment to international treaties, aiming to balance innovation with financial stability. However, rapid technological advancements often leave regulators playing catch-up. For example, the controversy surrounding the classification of ride-hailing companies like Grab was resolved only in 2020 under DECREE 10/2020, broadly defining them as transportation businesses.
E-Wallet and Payment Services: E-wallet services, categorized as Intermediary Payment Services (IPS), are subject to regulations such as Decree 52/2013/ND-CP and Circular 39/2014/TT-NHNN. Non-bank providers must obtain an IPS license from the State Bank of Vietnam (SBV) to offer e-wallet services, encompassing top-ups, payments, transfers, and withdrawals linked to partner banks. These regulations ensure the security and stability of payment systems.
E-Commerce Platforms: Fintech entities offering e-commerce platform services, including payment applications, must adhere to Decree 52/2013/ND-CP and its amendments like Decree 85/2021/ND-CP. Furthermore, registration with the Ministry of Industry and Trade (MOIT) is mandatory. These regulations aim to facilitate the growth of e-commerce while protecting consumers and maintaining fair competition.
Digital Banking: While digital banking is evolving in Vietnam, the establishment of fully licensed digital banks has yet to materialise. Fintech companies often collaborate with traditional banks to create digital banking platforms. This practice enables the extension of digital financial services while adhering to existing banking regulations, ensuring stability within the financial sector.
P2P Lending: Online lending remains unregulated, especially peer-to-peer (P2P) lending. Fintechs in this sector often act as intermediaries connecting lenders and borrowers. The State Bank of Vietnam (SBV) has cautioned about potential risks, hinting at future regulations under the Fintech Sandbox Draft Decree. This reflects the cautious approach to ensuring financial security while fostering innovation.
Buy Now Pay Later and Wage Advance: Services like Buy Now Pay Later and Wage Advance do not neatly fit existing regulations. Some fintechs operate creatively within the current regulatory framework, yet uncertainties and limitations persist. Given their innovative nature, it is challenging to address these services under a specific regulatory framework.
Investments and Fundraising: Regulations related to retail investments in fintech applications must be improved. Although fintechs have developed mobile applications for fund management, retail investment options remain limited. Crowdfunding for charitable purposes is present, but crowdfunding for start-ups is less common, reflecting the need for clearer regulations.
Robo-Advisors: Although not specifically regulated, Robo-advisors are being utilized in Vietnam. Existing regulations governing financial consultancy and computer-related services are applied to ensure transparency and consumer protection.
Cryptocurrencies and Tokens: Vietnam is conservative on cryptocurrencies and tokens. They are not recognized as assets, and trading platforms are deemed unlawful. Initial Coin Offerings (ICOs), Initial Bounty Offerings (IBOs), and Initial Exchange Offerings (IEOs) are not recognized. The State Bank of Vietnam (SBV) and the Ministry of Finance (MOF) have prohibited cryptocurrencies and Bitcoin, aligning with a cautious approach to potential financial risks.
Play-to-Earn Games: In Vietnam, NFT or blockchain gaming services remain unestablished and unlicensed. Offshore play-to-earn games are accessible but face regulatory restrictions and the risk of being categorised as unlawful gambling, reflecting the government’s concerns about potential negative societal impacts.
Conclusion
In conclusion, Vietnam’s regulatory landscape for fintech and digital assets is a work in progress. The sectoral approach, while adaptable, sometimes struggles to keep pace with rapid technological advancements. Striking a balance between innovation and financial stability remains a challenge. Fintech companies operating in Vietnam must navigate this evolving terrain, staying informed about regulatory changes and seeking legal guidance to ensure compliance with existing laws and regulations. As Vietnam continues to develop its fintech ecosystem, it will be crucial for regulators to adapt and establish clear frameworks to promote innovation while safeguarding financial integrity.
