Get ahead of the trend or stay out of the game?

After just over a month in office, US President Donald Trump has made groundbreaking policy changes, having a profound impact on the global digital currency market.

From launching his own meme coin (cryptocurrency), to pledging to turn the US into the "global crypto capital", Mr. Trump's new policies are reshaping the world's digital financial landscape and raising important questions for developing countries, including Vietnam.

From the meme coin phenomenon $TRUMP and $MELANIA…

Just three days before the Presidential inauguration, on January 17, the cryptocurrency market witnessed an unprecedented event when a US President-elect launched a meme coin named after himself. The $TRUMP coin quickly created a fever, reaching a peak capitalization of 14.5 billion USD in a short time.

Soon after, First Lady Melania Trump also launched the $MELANIA coin with a peak capitalization of up to 13 billion USD.

According to a Reuters investigation, the Trump Organization, through its subsidiary CIC Digital LLC, controls up to 80% of the supply of $TRUMP and has earned nearly $100 million in transaction fees in just the first two weeks. This move has been met with harsh criticism from experts and those in the cryptocurrency industry, due to concerns about conflicts of interest when a sitting President is directly involved in financial activities that may be affected by policies issued by himself.

Worryingly, both meme coins lost about two-thirds of their value after the initial boom, causing huge losses for many late investors, while large holders of the original coins (including the Trump Organization) reaped significant profits.

Tiền kỹ thuật số thời Trump: Đón đầu xu thế hay đứng ngoài cuộc chơi?

The $TRUMP coin quickly created a fever, reaching a peak capitalization of 14.5 billion USD in a short time. Shortly after, First Lady Melania Trump also launched the $MELANIA coin with a peak capitalization of up to 13 billion USD. (Source: Stockbiz)

…to a long-term Bitcoin strategy

President Donald Trump's policy on digital currencies is clearly polarized in two streams.

Regarding digital currencies issued by central banks (CBDC), Mr. Trump expressed strong opposition. During the election campaign, the US leader also repeatedly expressed concerns about the "digital USD" issued by the Fed, saying that it could lead to excessive centralized control and unfair competition with decentralized crypto. In Article 5 of the Executive Order signed on January 23, Mr. Trump also specifically stipulated: "Agencies and organizations are prohibited from taking any action to establish, issue or promote CBDC within the United States or abroad, except as required by law."

Trump is very fond of bitcoin and non-state digital assets. In addition to meme coins, the US President has shown strong support for Bitcoin and other platform cryptocurrencies. At the Bitcoin Conference 2024, he pledged to make the US the "crypto capital of the world" if re-elected. Just three days after taking office, the White House boss signed an executive order establishing a special working group on crypto regulation and proposed a plan to build a national Bitcoin reserve.

In other notable moves, Trump sharply criticized the US Securities and Exchange Commission (SEC) for being “hostile to crypto” under his predecessor Joe Biden and pledged to ease harsh regulations. This is a radical change from Washington’s previous policy and shows a new direction in the relationship between the government and the crypto industry.

President Trump’s support for Bitcoin seems to stem from a number of factors. First, he sees the sector’s huge economic potential, especially after Bitcoin surpassed $109,000 after the election. Second, he has received significant support from billionaires in the crypto industry, especially Elon Musk, who has been a strong supporter of his campaign. Third, the US President’s economic libertarian views favor a decentralized model.

Mr. Trump’s policy reflects his entrepreneurial personality and is in marked contrast to many other countries that are actively developing CBDCs as part of their national financial strategies.

President Donald Trump's policy on digital currency is clearly polarized in two money streams. (Source: Fox Business)

New opportunity?

Donald Trump’s new policies are turning the global cryptocurrency market upside down. The US government’s support could accelerate the process of formalizing cryptocurrencies in the financial system, promote blockchain research, and strengthen investor confidence. If cryptocurrencies are gradually accepted, the leading countries and investors will have the opportunity to benefit significantly.

The growth potential of cryptocurrencies is based on three main factors: large room for expansion due to low user rates, less connection with traditional financial markets which helps diversify investments, and positive impacts from the policies of the new US President.

In addition, a more open regulatory environment in the US could spur innovation, attract investment in fintech, and encourage the development of financial solutions based on Bitcoin and blockchain. These advances not only reduce cross-border transaction costs but also support financial access, which is considered very beneficial for developing economies.

Potential challenges

Mr. Trump's crypto strategy, while ambitious, poses many risks to the global financial system.

First, the US accepting and accumulating Bitcoin could cause major fluctuations in the currency market, affecting the position of the USD.

Second, the meme coin boom under the President’s endorsement could stimulate speculation, creating dangerous asset bubbles. In particular, a sitting leader directly benefiting from a coin bearing his name sets a worrying precedent for conflicts of interest.

Third, the differences in approaches to digital currencies among major powers – the US supports decentralized crypto, while China, the EU and many major countries develop CBDCs – could fragment the global payment system, weaken the efficiency of cross-border transactions and create new challenges in capital flow management.

The international financial landscape may be changing rapidly as cryptocurrencies gain global recognition. (Source: Reuters)

Some thoughts for Vietnam

For Vietnam, for a long time, cryptocurrencies have not been fully recognized legally, and are often placed in the gray area of the legal framework. Meanwhile, according to data from the Vietnam Blockchain Association, in the period of 2021-2022, our country is in the top 3 in the world in terms of the percentage of people owning digital assets (equivalent to 21% of the Vietnamese population owning), only after the UAE and the US. Also according to a report by market analysis organization Chainalysis, the flow of digital assets into Vietnam in 2023 will reach 120 billion USD.

The international financial landscape may be changing rapidly as cryptocurrencies are gradually becoming officially recognized globally and becoming a form of reserve assets, with payment value similar to gold. This is an important transition period that Vietnam needs to participate in early, anticipate the trend, and proactively shape its own strategy, suitable to the country's conditions and development goals.

In the immediate future, we need to quickly complete the legal framework for digital currencies, including cryptocurrencies and digital assets. This legal framework needs to strike a balance between encouraging innovation and protecting users, between attracting investment and ensuring national financial security. In particular, Bitcoin, due to its algorithmic structure, can only create a limit of 21 million digital token units, giving this currency a rare value equivalent to “digital gold”. Accordingly, it is necessary to consider the option of including Bitcoin as a source in the national strategic reserves.

In addition, the government needs to facilitate the development of the blockchain and fintech ecosystem through the establishment of pilot policy models “sandboxes” that allow testing of digital financial solutions. At the same time, it is necessary to prioritize investment in education and training of human resources on blockchain technology and digital finance, as well as encourage cooperation between management agencies with businesses and research agencies to promote the exploitation, development, application and management of these new financial products.

From the perspective of economic diplomacy, cryptocurrencies and crypto assets are gradually asserting their position as potential financial resources with outstanding growth prospects in the digital age. Facing this wave of transformation, Vietnam cannot stand aside, but needs to proactively manage, prevent risks, grasp and exploit the potential of new resources to serve development goals, bringing the country into a new era.

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OVERVIEW OF DIGITAL CURRENCY ECOSYSTEM

In the current digital era, the cryptocurrency ecosystem is growing rapidly with many diverse forms, from government-issued digital currencies to decentralized cryptocurrencies. The emergence of these digital assets has created fundamental changes in the way people transact, invest and store value.

Here is an overview of the six most popular subgroups in the modern cryptocurrency ecosystem: