Central Bank digital currency (“CBDC”): Advantages and challenges for policy development in Vietnam
Increases in the price of Bitcoin has led to the emergence of many cryptocurrencies, however, most current digital currencies are not official, they are published by civil organizations, not guaranteed by governments.
1. Overview on the status of CBDC in Vietnam
A lot of published documents give an academic perspective as well as a measure for this issue. One of the brightest measures is the issuance of CBDC. Nevertheless, applying CBDC into practice is still complex and difficult, explaining why only a few countries have recognized this kind of money. The Central Bank of Vietnam currently has published a plan to issue CBDC shortly but is still researching the ability to bring CBDC into force.
The current regulations related to the cryptocurrencies of Vietnam have not kept the same pace with the change of globalization. It is time for Vietnam to change the legal frame and create a revolution in technology by issuing CBDC. However, before using CBDC as an official currency, the authorities of Vietnam should first study the advantages and disadvantages of CBDC issuance in the country’s conditions.
2. Advantages for the policy development on CBDC issuance in Vietnam
Currently, to issue a CBDC, there are two main conditions that a country needs to meet if it wants to smoothly issue a CBDC: a strong blockchain platform and financial inclusion. The followings are some reports related to technological achievements and the data related to blockchain and financial inclusion which have been reached in Vietnam in recent years, these achievements are foundations for Vietnam to base on in issuing CBDC process.
There has been a huge development in blockchain technology in Vietnam in recent years. In government, the Ministry of Information and Communications has officially launched akaChain, a blockchain technology platform developed and applied by FPT Software as a digital identity solution. In the enterprise, many blockchain projects in Vietnam have resonated at home and abroad, including Axie Infinity, KardiaChain, and My Defi Pet.
According to the financial inclusion aspect, Vietnam reached 154.4 million mobile connections in January 2021, accounting for 157.9% of the country’s population. While the Government predicts that cashless payment transactions will grow at an annual rate of 20-25% , electronic payments are likely to grow strongly across the country, even in rural areas.
3. Challenges for the policy development on CBDC issuance in Vietnam
Regardless of the strengths mentioned above, it is still there difficult and time-costing to completely replace paper money with CBDC. So there will certainly be a time when CBDCs exist in parallel with paper money.
At a ratio of 69%, Vietnam ranks second (after Morocco) in global populations that cannot access financial services and do not have a bank account. There was a report from Agribank (a bank in Vietnam that aim for customers connecting to agriculture) showing that more than 70% of Vietnam’s population is concentrated in rural areas, but the rate of access to modern banking services in this area is still limited.
CBDC is blockchain-based, which means it relies on the developer’s design and programming ability. Therefore, any mistake that constitutes a developer’s vulnerability might lead to unpredictable consequences, especially this is a measure placing for the legal currency.
Certainly, the issue of privacy will be debated. The most pressing challenge for the Government is how to balance factors of people’s privacy while keeping the avoidances elements in CBDC transactions under control.
Shortly, developing the CBDC issuance policy as fast as possible had a significant influence on the Vietnamese economy in general and the financial system in particular.
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