An Overview on Vietnam’s Cryptocurrency Market, Part 2
Read Part 1 here:
3. NFT & GameFi Leading the Trends
Built upon the rising adoption of cryptocurrency as well as a strong tech talent base, Vietnam has seen the skyrocketing launch and growth of some of the best and brightest projects in Web3, particularly among NFT & GameFi.
Axie Infinity (ticker: AXS) is noticeably the most famous GameFi project that has come out of Vietnam. Per their whitepaper, Axie Infinity is an NFT game powered by the Ethereum blockchain and described as a cross between CryptoKitties and Pokemon. Launched in 2018 and developed by the gaming studio Sky Mavis, the game has exploded in the past 2 years based on its Play-to-Earn model, which allows users to play the game and trade digital assets that are part of the in-game economy as well as earn from in-game activities. In November 2021, Sky Mavis raised USD 152 million in a Series B round led by venture capital giant Andreessen Horowitz, valuing the blockchain startup at around USD 3 billion. At the time, the game claimed to have over 2 million Daily Active Users (DAUs), USD 2.2 billion trading volume in NFTs, and USD 4.5 billion in total value locked (TVL) on Ronin (AXS’s Ethereum sidechain).
The rise of Axie Infinity has led to an inflow of VC funding for other NFT game developers in Vietnam, such as Sipher, which raised USD 6.8 million seed round led by Arrington Capital, Hashed, and Konvoy Ventures last October, and Thetan Arena, a MOBA/battle royale game co-developed by Wolffun Studio and Kardiachain. While Sipher hasn’t officially launched their gameplay, Thetan Arena has already released their playable version on both PC and mobile App Stores, with significant traction: According to the company, at the end of 2021, Thetan Arena has already racked up over 7 million in-game users.
“Vietnam is one of the most exciting and fast-growing markets in the world today for blockchain adoption. Local communities are realizing the potential impact of this emerging financial system and, in particular, the opportunities in play-to-earn gaming. Ancient8 has built an incredible gateway for the play-to-earn ecosystem as Vietnam’s largest blockchain gaming build and we’re excited to partner with them.” — Paul Veradittakit, Partner at Pantera Capital.
The Play-to-Earn model, pioneered by Axie Infinity, also gave way to the rise of crypto game guilds. Traditionally, a gaming guild is an organized collection or group of gamers that play certain video games together on a regular basis. Crypto game guilds, on the other hand, go beyond that: they seek to become a platform to support new gamers (which they called “scholars”) through the necessary funds (usually called “scholarships”) and tools to experience a growing roster of Play-to-Earn games, in exchange for a percentage of players’ earnings. While global guilds like Yield Guild Games, Merit Circle, UniX Gaming... have established their brands through early successes, Vietnamese guilds have recently risen to compete with the major players. Vietnamese guild Ancient8 raised $4M in January 2022 in a seed round led by Dragonfly Capital, Pantera Capital, and Hashed.
4. Other Growing Sectors
While NFT & GameFi lead the trends, the crypto ecosystem as a whole continues to develop steadily. Chainalysis’ **Global Crypto Adoption Index ranked Vietnam 2nd globally in terms of DeFi adoption. According to the crypto research firm, “While grassroots cryptocurrency adoption generally is highest in emerging markets, DeFi adoption is strongest in high-income countries that already had substantial cryptocurrency usage, especially amongst traders and institutional investors.”
This substantial level of adoption has driven global crypto investors to deploy capital into Vietnamese DeFi platforms. Coin98 Labs raised USD 11.5 million in July from a group of investors led by Hashed and Spartan Group, then another strategic funding round from Binance Labs, the venture arm of cryptocurrency exchange Binance. Another DeFi platform, Rikkei Finance, raised USD 5.6 million from a host of investors in the blockchain industry, including HyperChain Capital, Kyber Network, Signum Capital...
5. Regulatory Contexts
Despite all the promising growth and development described above, cryptocurrency in Vietnam is still legally not recognized, especially crypto trading. In layman’s terms, cryptocurrency trading involves exchanging one cryptocurrency for another, buying and selling coins, and exchanging fiat money into crypto.
According to Vietnam Briefing, a news outlet of the law Dezan Shira & Associates, Vietnamese law does not mention cryptocurrencies as a legal means of payment or recognize them as an asset or a foreign currency; yet, possessing, trading, and investing in cryptocurrencies is not forbidden nor permitted according to the current laws. Another legal op-ed from Indochine Counsel stated that issuing, supplying, using Bitcoin and other cryptocurrencies as forms of payment is an act prohibited in Vietnam, according to its study on the regulatory actions from the State Bank of Vietnam (SBV). LNT & Partners also issued an op-ed explaining in detail about the current legal standings of cryptocurrency in Vietnam, in which Vietnamese laws do not permit cryptocurrency trading but also do not prohibit this activity either, because cryptocurrency trading is listed in neither the system of economic branches of Vietnam under Decision No. 27/2018/QD-TTg nor on the lists of conditional or prohibited business lines under the Law on Investment 2020.
Nevertheless, the Vietnamese government does not plan to sit on the sideline of cryptocurrency growth. On August 21, 2017, Prime Minister Nguyen Xuan Phuc issued Decision No 1255/QĐ-TTg, paving the way for completing the legal framework for managing virtual assets, cryptocurrencies, and any other electronic currencies. In addition, the Prime Minister also issued Directive No. 10/CT-TTg on 11 April 2018 to tighten the management of bitcoin-related activities and other virtual currencies. The Directives play an important role in putting cryptocurrency trading under control and minimizing its potential negative impacts on the Vietnamese market.
Then, on June 15, 2021, Prime Minister Pham Minh Chinh issued Decision No. 942/QD-TTG (“Decision 942”), approving the strategy for the development of e-government towards the digital government for 2021-2025 with an orientation for 2030. Decision 942 is very remarkable because a key pillar of this regulatory guideline is the research and use of cryptocurrency as one of the solutions to develop the digital government. In particular, this Decision sets out a space for all the pilot digital services and assets, defined as follows:
“The space for pilot digital service provision shall be a digital space that allows for pilot deployment of all innovative digital products and services which are not yet regulated by legislative documents and the scope, size and operating models of which are under strict technology-based supervision. Such products and services shall undergo assessment when pilot deployment has reached a certain scale to establish necessary legal parameters.” — Clause IV.1.h, Decision 942
6. Conclusion
Vietnam is a young, growing economy in Southeast Asia with a vibrant tech ecosystem and robust IT talent base. Consequently, it has seen a meteoric rise of successful blockchain projects in the last few years, especially in NFT & GameFi as well as other sectors such as DeFi. Axie Infinity, Sipher, Coin98, etc are only a few noticeable names among the rising stars in the global blockchain industry that have stemmed from Vietnam.
Nevertheless, the legal contexts are not immediately clear, as the government still struggles to path the charts towards sustainable development and responsible regulations for cryptocurrency. Therefore, in order to expand and thrive in this market, one must exercise its setup and operational plans with utmost caution and, suggestively, have the local expansion led by individuals and/or partners who possess detailed knowledge about the market.
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