BLOCKCHAIN GOLD RUSH: An estimated 17 million people own digital assets in Vietnam, and only India, the US and Pakistan have seen more widespread usage
As a first-year computer science student in Hanoi, Hoang Le started trading crypto from his university dorm room, egged on by his gamer friends who were making a killing.
At one point his digital holdings swelled to US$200,000 — about 50 times the average annual income in Vietnam.
However, they crashed to zero when the bottom fell out of bitcoin and other cryptocurrencies in the past few months.
Getting wiped out “hurt a lot,” he said, adding that he also learned a valuable lesson: He has come to think of the losses as “tuition fees.”
“When profits were high, everyone became greedy,” said Le, now 23, adding that “it was too good to be true.”
Unlike neighboring China which has banned cryptocurrencies outright, communist Vietnam has allowed blockchain technology to develop in a legal “gray area” — barring its use for payments, but letting people speculate unimpeded.
As a result, the young-and-upwardly mobile country of 100 million has been at the forefront of crypto adoption, with an estimated 17 million people owning digital assets.
Only India, the US and Pakistan have seen more widespread usage, a ranking released by the consultancy Chainalysis Inc last year showed.
However, what once looked like first-mover advantage increasingly looks like a liability as investors stare down a crypto winter.
The price of bitcoin has almost halved since hitting a record high above US$126,000 in October last year, and other digital tokens have slid even further.
Vietnamese crypto start-ups hawking everything from NFTs to blockchain-based lending and trading services have been hammered, with bankruptcies and layoffs roiling the industry.
“Many companies have shut down because of this crisis,” Ho Chi Minh City’s blockchain association head Tran Xuan Tien said.
He added that others are “downsizing and conserving capital to extend their runway.”
Blockchain firm Ninety Eight cofounder Nguyen The Vinh said his company has laid off about one-third of its staff since last year.
There was more “restructuring” to come, given the gloomy outlook, he said.
“The market will likely remain difficult for years, not just months, so we need backup plans,” he added.
Until recently, Vietnam’s crypto scene was a wild west, with highly speculative ventures and outright Ponzi schemes flourishing alongside start-ups offering legitimate products.
The Vietnamese government warned about the dangers of crypto and broke up several huge scam operations, including one that allegedly swindled about US$400 million from thousands of investors.
However, it did not move to crush the industry as Beijing did, instead opening “a window for domestic businesses to experiment,” Tien said.
Under Vietnamese Communist Party General-Secretary To Lam, the country’s top leader who has pursued sweeping growth-oriented reforms, Vietnam has formally embraced the blockchain industry and is gradually asserting control over the estimated US$100 billion market.
Last year it passed a law recognizing digital currencies, bringing them under a regulatory framework for the first time. It came into effect last month, but investors have questions about how it would be implemented.
Hanoi has also announced a five-year crypto trading pilot program, which would allow Vietnamese firms to issue digital assets.
However, lingering regulatory ambiguity has kept many firms based in the country from formally registering there, opting instead to file paperwork in places such as Singapore and Dubai, United Arab Emirates.
Vinh says some firms are folding and others downsizing or pivoting because of the “prolonged downturn and an unclear legal framework.”
New entities are struggling to gain traction as investor sentiment sours.
Huu, 24, said fundraising for his cryptoproduct start-up has suddenly become much harder, and asked that only his first name be used for fear of hurting his business.
Foreign investors were once enticed by promises of 400 and 500 percent returns, he said, but were now discovering they “might lose everything.”
“Over the past few months, things have gone downhill badly,” he added.
Founders including Huu and Vinh said the current downturn is part of a natural business cycle, and stronger firms would eventually emerge offering better products.
However, that is cold comfort for the nearly 55 percent of individual Vietnamese crypto investors who according to one market analysis reported losses last year.
“In Vietnam, a lot of people trade crypto,” Huu said. “When prices fall, people complain about losses, and the overall mood becomes very gloomy.”
