Vietnam

Cryptocurrency market is ‘most mature’ in these 2 countries, new Huobi report reveals

The United States and Vietnam score the best on “crypto maturity” in 2022, a new report determines.

Bitcoin (BTC) and crypto are only used by 13.7% of Americans, but they generate more exchange volume than anyone else.

The latest data compiled by exchange Huobi confirms that in 2022, the United States is the most “mature” cryptocurrency market.

U.S., Vietnam lead the way on crypto

Despite the heavy drawdowns in price for Bitcoin and altcoins this year, interest throughout the world remains “extremely active,” and the leaders may come as a surprise.

In its latest annual report, Huobi Research, an affiliate of Huobi Global, revealed that the U.S. accounts for 9.2% of global centralized exchange (CEX) volume. When it comes to DeFi, the figure is even higher — 31.8% of global volumes.

At the same time, the percentage of the population using crypto is not as high as in some other jurisdictions. 13.7% of Americans use crypto, the report said, compared to 20.3% Vietnam, the leader out of the 15 countries examined.

*Crypto market development chart (screenshot). Source: Huobi*

Overall, however, the U.S. achieved the highest normalized score for “crypto market maturity,” far ahead of any competitor. Second on the list is Vietnam, with a score of 35 versus 91.9 for the U.S.

Nonetheless, Huobi describes Vietnam as the country with the “highest adoption rate in cryptocurrency” and calls the crypto trading scene in both South Korea and Japan “extremely active.”

“Japan and South Korea have contributed tremendous traffic to exchanges. Specifically, South Korea ranked second with 7.4% and Japan ranked sixth with 3.85% in Asia,” the report noted.

At the other end of the spectrum, the countries with the lowest maturity score are China, Singapore and South Korea, with 5.9, 9.4 and 14.5, respectively.

*Crypto maturity scores by country (screenshot). Source: Huobi*

Singapore stands out with its position, given the rate of regulatory expansion and acceptance of cryptocurrency as a technology.

“Singapore has become the best destination for technology startups, luring a large number of innovators and unicorn companies, which naturally includes the crypto players,” Huobi wrote.

“Singapore maintains highly tolerance and openness for the crypto industry: regulations are enforced, but there is still plenty of room for innovation.”

The report nonetheless identifies only 4.9% of Singapore’s population trading crypto, contributing 0.8% of global CEX volumes, with an internet population index of just 2/100.

“Appropriate” regulation would prevent FTX black swan

The report meanwhile acknowledges that the regulatory situation is tenuous for crypto in the wake of the FTX scandal.

Related: Will Grayscale be the next FTX?

Despite this, FTX is not the biggest catastrophe of the year for crypto, it says, with the Terra LUNA debacle and Three Arrows Capital (3AC) insolvency more pressing.

“The FTX bankruptcy is the third most influential incidents in 2022 after the collapses of Terra and 3AC,” it commented.

“The main issues of the FTX case are the misappropriation of funds, affiliate transactions with Alameda Research, etc. At the time, some U.S. regulators expressed that they were investigating or had already started investigating the issues a few months ago. However, the FTX incident will not happen if regulations of crypto assets in various countries are appropriately in place.”

Cointelegraph continues to report extensively on the latest events surrounding FTX and its impact on the crypto market.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Vietnam’s prime minister calls for crypto regulation: Report

“It is necessary to study appropriate sanctions, and assign the government to make detailed regulations,” Prime Minister Pham Minh Chinh reportedly said.

Pham Minh Chinh, the prime minister of Vietnam, has reportedly said the country’s government should study crypto regulation, in part based on residents continuing to trade digital assets despite their lack of legal recognition.

According to an Oct. 24 report from online news outlet VnExpress, Chinh hinted that a bill on Anti-Money Laundering, or AML, should recognize an amendment on virtual currencies given that “in fact, people still trade” crypto in Vietnam. The prime minister’s comments suggested the Vietnamese government may consider crypto regulation to address its role in financial crimes.

“It is necessary to study appropriate sanctions, and assign the government to make detailed regulations,” the prime minister reportedly said.

The Vietnamese government largely does not recognize cryptocurrencies like Bitcoin (BTC) as a method of payments in the country, but allows tokens to reside in a seemingly legal gray area as investments. A Chainalysis report released in September showed that Vietnam ranked first among all countries in crypto adoption in both 2022 and 2021, with “extremely high purchasing power and population-adjusted adoption across centralized, DeFi, and P2P cryptocurrency tools.”

Some local lawmakers have pushed for the adoption of crypto assets as the space and rate of adoption grew. In March, Deputy Prime Minister for General Economics Le Minh Khai requested the Ministry of Finance explore and amend laws aimed at developing a framework for cryptocurrencies. This followed an initiative announced by the prime minister in July 2021 directing the State Bank of Vietnam to study and conduct a pilot for a digital currency.

Vietnam’s National Assembly will discuss the AML bill on Nov. 1 and likely approve or disapprove it by the end of its fourth session on Nov. 15.

Vietnam’s crypto adoption: Factors driving growth in Southeast Asia

Vietnam has the highest crypto adoption rate in the world. There are numerous factors driving the trend.

The Southeast Asian nation of Vietnam now ranks among the top nations adopting cryptocurrencies. Indeed, the country has ranked first on Chainalysis’ Global Crypto Adoption Index for two years in a row.

Chainalysis’ research methodology took into account population-adjusted adoption in crypto platforms ranging from centralized exchanges to peer-to-peer (P2P) payment networks. Web traffic to major crypto networks was analyzed to determine countries with the highest interest and adoption percentages.

That said, Vietnam’s high adoption rate is a puzzling phenomenon, begging the question: Why is crypto adoption so high in the country?

No cryptocurrency taxes

There are numerous reasons why the crypto adoption rate in Vietnam is so high and one of them is that, unlike in the United States and other major jurisdictions where cryptocurrency holdings are taxed, there are no crypto taxes in Vietnam.

Right now, the Vietnamese government does not even recognize cryptocurrencies as legal tender. While the nation’s tax authorities have shown interest in taxing cryptocurrencies, they lack the mandate to designate them as taxable assets. As such, Vietnamese law is largely silent when it comes to crypto taxation.

Consequently, financial institutions in the country are barred from handling them. However, Vietnamese citizens are allowed to possess and trade crypto.

The lack of crypto taxes makes digital currencies ideal as investment instruments, hence the rise in adoption. The trade-off is that Vietnamese law doesn’t protect crypto users in the event of scams or losses. As such, cryptocurrencies cannot be used legally in trade relationships.

However, the nation’s financial regulatory agencies are working to come up with elaborate crypto usage guidelines. This is following a July 2021 directive issued by Prime Minister Phạm Minh Chính in which he asked the State Bank of Vietnam to explore the benefits and downsides of digital currencies with a view to draft regulations. The institution is likely to come up with a raft of measures that include tax and user protection guidelines.

Cointelegraph had the chance to speak with Gracy Chen, managing director of the Bitget cryptocurrency exchange, regarding Vietnam’s regulatory landscape and the developing situation.

According to Chen, clear and robust regulations would allow institutional inventors in the country to start dealing in crypto, and this would be a big win for the industry:

“When the regulation actually comes out, it may lead to a short-term impact on local fiat exchange trading, but in the longer term, clear regulation may encourage broader adoption and lay the groundwork for increased retail and institutional engagement since a better-regulated market will provide greater protection and increase trust of investors. So overall, the pros outweigh the cons.”

Vietnam has a huge unbanked population

Many Vietnamese have limited access to standard financial services. According to a 2021 study carried out by Statista, the country ranks second among the top 10 unbanked nations. The report highlights that about 69% of the citizenry lacks access to typical banking services.

World Bank estimates indicate that just over 61% of the country’s population resides in rural areas, where access to modern banking services is limited. This void is rapidly being filled by cryptocurrency networks. Novel revolutionary blockchain concepts such as decentralized finance (DeFi) are also gaining traction among Vietnamese crypto investors who wish to obtain credit for crypto investment purposes.

DeFi is a hypernym for blockchain-based financial networks that provide services similar to those offered by banks. DeFi platforms allow users to earn interest on their money, lend and borrow funds, as well as trade in crypto derivatives. They also enable investors to safeguard their assets using DeFi insurance and don’t require paperwork. This makes them convenient for unbanked Vietnamese, especially those who wish to scale their crypto investments and earn passive income.

Notably, Vietnam is ranked second among nations with the highest DeFi usage in the world, according to the 2021 Chainalysis Global DeFi Adoption Index report.

Remittances

In 2021, Vietnamese nationals living in the diaspora sent home over $18 billion in remittances, setting a new record, which made the country the eighth biggest remittance beneficiary in the world. This was a 3% increase from the $17.2 billion recorded in 2020.

For Vietnamese who regularly send money to their families in Vietnam, transfer fees are often exorbitant. The surcharges usually include administrative fees and exchange rates. According to World Bank statistics, remittance costs to Vietnam average about 7% as of 2020.

Exorbitant fees, in addition to the unbanked population’s lack of access to money transfer services, have made cryptocurrency transfers an appealing option for Vietnamese living abroad to help support their families back home.

While blockchains do have transactions fees, they often pale in comparison to those of remittance networks, and furthermore are P2P and don’t rely on a middleman to complete the transaction.

The rising popularity of GameFi

Blockchain games with financial incentives, often referred to as GameFi, use innovative economic models that allow users to earn rewards while playing. The rewards are usually in the form of nonfungible tokens (NFTs) and cryptocurrencies.

As cryptocurrencies are at the heart of GameFi environments, many gamers learn how they work as part of the gameplay, providing another avenue for adoption.

According to Chainplay’s State of GameFi 2022 survey in August, 75% of GameFi crypto investors said that they started investing in digital currencies after joining GameFi platforms.

GameFi, especially play-to-earn (P2E) games, are immensely popular in Vietnam and have contributed greatly to cryptocurrency adoption in the country.

According to a 2021 research report published by data aggregation service Finder, Vietnam ranks sixth on the list of countries with the highest percentage of P2E gamers. According to the survey report, 23% of Vietnamese participants said that they had, at some point, played P2E games.

Today, numerous GameFi startups have set up shop in the country due to the pervading NFT gaming culture, and this is, in turn, driving crypto adoption. The developers include Ancient8, Sipher and Summoners Arena.

Notably, Axie Infinity, one of the most popular play-to-earn games in the world, has its roots in Vietnam.

Chen said that the relationship between GameFi and crypto adoption is part of the reason why both sectors are thriving:

“According to data from Google, Sensor Tower, and Data.ai, Vietnam ranks first in Southeast Asia in producing applications and games in stores like Apple Store and Google Play. Meanwhile, the new huge crypto adoption all over the world last year was in part due to GameFi. These two factors are significantly connected, creating massive crypto adoption in Vietnam.”

Cryptocurrencies as a hedge against inflation

Vietnamese citizens have, throughout history, preferred using other national currencies such as the United States dollar during times of economic turmoil and hyperinflation. In recent years, Vietnamese people have also been accumulating assets such as gold to hedge against inflation.

At some point in the past decade, the Vietnamese citizens held as much as 400 tons of gold.

Of course, the emergence of cryptocurrencies has also led to more Vietnamese citizens using them to hedge against inflation instead of tangible assets such as gold.

While the Vietnamese central bank has warned individuals and institutions against dealing in virtual currencies due to their mercurial nature, dwindling faith in the Vietnamese dong has led to more Vietnamese investors turning to digital currencies. According to data derived from Statista, Bitcoin (BTC), which is widely used by investors as a hedge against inflation, is currently the most popular cryptocurrency in the country.

The report reveals that search interest in the country for the prime cryptocurrency stands at about 84.5% relative to other cryptocurrencies.

Crypto adoption in Vietnam is set to persist as more Vietnamese discover the convenience and possibilities of digital assets. Extensive regulations, however, appear to be a long way off. The State Bank of Vietnam has until 2023 to study the pros and cons of cryptocurrencies and come up with policy recommendations.