Opportunities from a multi-billion dollar market.

Cryptocurrency investment surges: Opportunities from a multi-billion dollar market.

It is estimated that hundreds of billions of USD worth of cryptocurrency have been transferred into Vietnam over the past year. However, the lack of a legal framework means that this capital is not well controlled, leading to tax revenue losses and potential money laundering risks.

Are Vietnamese people making billions of USD from cryptocurrency investments?

Lina Nguyen, Director of Business Development at Exness Investment Bank, believes that the dormancy period for cryptocurrencies is over, with positive signs constantly emerging and more and more institutional investors entering this market.

“Capital flows into digital assets will continue to increase. Financial institutions will also participate in this investment segment. Retail investors have similar interest, but they are hesitant and cautious,” commented Lina Nguyen.

Reportedly, in just the first few months of this year, more than $1.2 trillion has flowed into digital asset ETFs.

According to Chainalysis, the positive trend in the cryptocurrency market in 2023 will continue into 2024, especially after the boost from the US granting permission for trading of spot Bitcoin ETFs and the stronger participation of institutional investors.

Vietnam ranks third globally in the number of cryptocurrency owners. Data from Crypto Crunch App shows that Vietnam has 26 million cryptocurrency owners (five times the number of securities accounts in Vietnam).

Research by Dr. Nguyen Nhat Minh and Dr. Thai Trung Hieu, lecturers in blockchain business applications (RMIT University), shows that cryptocurrency owners in Vietnam have diverse demographics, including highly skilled young workers, tech enthusiasts, and small business owners seeking alternative investments.

Data from Chainalysis shows that up to $120 billion worth of cryptocurrency was transferred into Vietnam in the year leading up to June 2023. According to the same organization, cryptocurrency investors in Vietnam earned $1.18 billion in profits in 2023. Vietnam is one of five Asian markets in the Top 10 of the world's highest-earning cryptocurrency investment markets last year, alongside China, Indonesia, India, and South Korea.

According to Dr. Pham Anh Khoi, Vice Chairman of the Fintech Committee (Vietnam Blockchain Association), a report by Boston Consulting Group indicates that the global market for tokenized real world assets (RWA) is projected to reach $16 trillion, equivalent to 10% of global GDP, by 2030. Furthermore, Standard Chartered suggests this market could double to $30 trillion in the following four years.

Digital assets in general, and RWAs in particular, are considered a valuable opportunity, enabling developing countries like Vietnam to participate in the global capital market. They offer the advantage of being an efficient and low-cost channel for capital flow into projects with physical assets in Vietnam. The amount of cryptocurrency flowing into Vietnam over the past year was nearly five times higher than the amount of foreign direct investment (FDI) attracted.

A legal framework is needed soon.

Although digital assets are an attractive investment and fundraising channel, helping investors and funds diversify their portfolios, they are also a high-risk market with high volatility. Furthermore, this market has the highest number of fraudulent projects compared to other investment channels. Investors lacking knowledge are easily deceived or lose money when participating in this market. Therefore, it is not an investment channel for everyone.

Investors entering the digital asset sector in general, and RWAs in particular, need to prepare themselves with knowledge and understanding of the financial market, technology, and legal aspects; consult with experts and leading organizations; continuously assess and update on volatile and legal risks; choose reputable trading platforms; and especially, have a clear investment strategy and diversify their portfolio to minimize risks and maximize returns.

- Dr. Pham Anh Khoi, Vice Chairman of the Fintech Committee (Vietnam Blockchain Association)

To capitalize on the opportunities presented by the digital asset market, experts believe that a legal framework is needed soon.

"If proper management policies are implemented soon, instead of flowing into the informal economy , this capital could become a positive driving force for the economy. The first sector that could receive this capital is RWA (Residential Assets), due to its superior advantages such as being backed by real assets, high liquidity, and portfolio diversification," Mr. Khoi commented.

Dr. Nguyen Nhat Minh and Dr. Thai Trung Hieu also argue that the legal loophole surrounding cryptocurrencies exposes investors to significant risks, including fraud, market manipulation, and security breaches.

According to experts, as more and more people become interested in owning and investing in cryptocurrencies, the need for regulations to protect consumers and ensure transparency in the market is becoming increasingly urgent. This includes measures to prevent fraud and combat cyber threats. Implementing strict regulations to protect consumers can help build investor confidence and encourage broader participation in the cryptocurrency market.

Furthermore, an unregulated cryptocurrency market could threaten overall financial stability in Vietnam. Without proper supervision, financial crimes such as money laundering and terrorist financing risk occurring.

“The digital asset market, including cryptocurrencies, is still viewed with great caution by regulatory authorities. I believe that in the event of major global political and economic upheavals, cryptocurrencies will rise to prominence, putting significant pressure on the State Bank of Vietnam. The State Bank cannot stand idly by while cryptocurrencies play an increasingly important role in the global financial market. Perhaps, regulatory authorities should soon implement a controlled pilot program for cryptocurrencies to test their operation, thereby drawing lessons and experiences before officially implementing them in the economy,” recommended Dr. Nguyen Tri Hieu, an economic expert.

Source: https://baodautu.vn/dau-tu-tien-ao-tang-manh-co-hoi-tu-thi-truong-tram-ty-usd-d221181.html