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Vietnam crypto scam prompts crackdown

April 12, 2018

Vietnam has launched an investigation into a multi-million-dollar cryptocurrency scam, ordering a crackdown on trading in the highly-popular iFan and Pincoin digital currencies in its lightly regulated market.

Internetcafé in Hanoi, Vietnam
Image: picture-alliance/dpa

A directive signed by Vietnam's Prime Minister Nguyen Xuan Phuc on Wednesday requested to "strengthen the management of activities related to cryptocurrencies," and ordered a total of six ministries to "quickly consider and tackle" the fraud of about $658 million in such assets.

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The government statement announcing the moves didn't mention the names of the coins involved in the probe. But state media reported that it was targeted against Vietnamese company Modern Tech Jsc which was accused of scamming tens of thousands of people who bought iFan and Pincoin cryptocurrencies.

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The Ho Chi Minh City-based company promised to repay clients monthly interest — and more if they could attract other customers — but has been slow to pay them back as the value of the two coins slumped, newspaper VNExpress reported.

Paying with cryptocurrencies is illegal in Vietnam, where they are not recognized as a legitimate tender by the central bank. However there are currently no laws explicitly banning the possession of assets such as Bitcoin and Ethereum.

Legal handle on crypto

While so-called initial coin offerings (ICOs) have allowed some legitimate blockchain-related ventures to raise funds quickly by selling tokens to investors, the offerings have also been plagued by reports of wrongdoing.

Regulators are battling all over the world to gain control of cryptocurrency markets, amid fears that Bitcoin and cryptocurrencies —  untaxable assets that are exchanged independent of governments and banks — could be used to launder money and fund criminal or terrorist networks.

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The new Vietnamese directive said investing and trading the currencies was "increasingly complicated and threatens to affect the stability of the market, social order, and can pose great risks to organizations and individuals involved." It warned financial institutions against accepting the currencies and said authorities would "detect and handle" those dealing in the illegal units.

However, Vietnam has a booming startup sector which has gained a reputation as a hub for homegrown blockchain tech development. Several Bitcoin cafes have also opened to cater to a growing class of local cryptocurrency investors.

Experts now say the government's heavy-handed approach could quash ambition and income for the government.

"If there's too much regulation, that's going to hamper a very interesting, unique, and potential innovation stream for Vietnam, which could be a great source of foreign direct investment," said Thomas Glucksmann from Gatecoin, a Hong Kong-based cryptocurrency and blockchain token exchange.

uhe/nz (Reuters, AFP)