• Tue. Aug 2nd, 2022

Central Bank digital currency needed in Vietnam | Company

ByHazel R. Lang

Jul 5, 2022

Saigon Investment sat down with Dr. HO QUOC TUAN, University of Bristol, UK to further discuss this issue and asked him what Vietnam needs to do to deal with this new trend.

JOURNALIST: – Sir, what do you think of the trend of issuing CBDCs in the world, and in which direction should Vietnam go in the future?

Dr. HO QUOC TUAN – To begin with, we need to consider why central banks need to put this system in place. First, central banks see the future of the world as a cashless society and want to introduce an option for a digital currency. Second, by developing the CBDC, it is a way to build pressure as well as create a payment system in hopes of reducing financial costs. Third, some countries like China have ambitious plans for their currency to become the world’s dominant reserve currency. If the renminbi does not play this role today, they hope that being the pioneer of cryptocurrency will give them this advantage.

Looking at these options, Vietnam needs a CBDC to solve two problems, that of a cashless payment system and that of not depending on any economy. If countries implement cryptocurrencies, we can fully deploy our own cryptocurrencies and connect with them, instead of using others.

However, expanding in any direction is reasonable, not only for Vietnam but also for ASEAN countries that have huge trade with China, because there is the risk of being dominated by China. Chinese CBDC. Therefore, Vietnam must connect with ASEAN countries to have a cryptocurrency exchange system for ASEAN countries only, or even countries like Japan and South Korea can join this system. In a common network, each country can have its own CBDC linked to each other. When this system is formed and works effectively, the Chinese CBDC will not be able to dominate the regional market and will be forced to trade with all the countries in this network.

In this way, we hope to be less affected by the leading electronic payment countries in the world today, including China, because it is more difficult for another coin to counterbalance such a strong network. If China wants to counterbalance, it must establish its own network or join this network. In case of participation, China’s rights will be limited because even if its currency is strong, it will only represent one voice in the network like other countries.

Currently, with electronic payments being very popular, China is trying to promote the use of electronic money in the country and will encourage the use of trading partners including Vietnam. If we don’t develop this system early enough and get Vietnamese companies used to using Chinese CBDC in payments, it will be very difficult to change this habit later.

– Sir, concretely, what should Vietnam do now?

– We have an international financial center project located in Ho Chi Minh City, and the CBDC is a natural component of this center. The financial center combined with technology is the basis for using CBDC in Vietnam. At the same time, it is necessary to have a specialized multidisciplinary committee that has many management bodies within it. Currently, almost everything related to cryptocurrencies is left to the State Bank of Vietnam, while this issue is not straightforward if you look at the structure of organizations that use CBDC, in the UK for example. This concerns not only the State Bank of Vietnam, but also many other agencies.

Because if they are assigned to an executing agency, they can only deal with their internal problems. Specifically, the State Bank of Vietnam only cares about monetary security. While for digitization, we need to pay more attention to data security. China, the United States or Europe are all very interested in this question. If we leave everything to the Central Bank, they will not have enough power to determine where the server is located, and who can access or use the data. It is therefore necessary to change the functioning of the judicial institution, in particular with regard to the role of associations and lawyers.

The current way of legislating in Vietnam is to have a management agency submit a draft for comment. If possible for this new area, specialized legislative agencies should sit down with departments and agencies and put in place an initial framework, instead of having the State Bank of Vietnam or the Ministry of Finance take care of make laws.

Lawyers often work and liaise with many relevant national and international organizations. They understand the problems and can compare with international law to propose new frameworks. In other words, it is necessary to form a specialized agency when there are new problems, which can be pushed through this department. This department can be headed by people who understand the relevant laws and have very quick access to international law.

– Sir, there is an opinion that the next monetary revolution is quietly taking place thanks to the issuance of CBDC. What is your opinion on this?

– It is very difficult to answer this question precisely because the forecasts concerning the future of the financial market for four or five years to date are not correct. There is an opinion that the CBDC will heat up, but there is also a prediction that the CBDC will go nowhere, and remain a bubble, and then deflate. But if we don’t, when this trend becomes more widespread, we will be dependent on the currencies of other countries. This goes against the view of the Prime Minister of Vietnam, which is to build an independent and self-sufficient economy.

As such, we are obligated to seek out and prepare for such a future. So if CBDCs go mainstream, we will have the tools to thrive. If you want to have the tools ready, you don’t need to find a way to catch the trend, but to prepare the basis to capture the trend when it heats up.

– Thanks a lot.

Yen Lam


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