Population: 97 million

Wealth in domestic bank deposits: 526 billion USD (2024)

Offshore expatriated wealth: 2.9 billion USD

Main offshore banking locations: N/A

Number of individual brokerage accounts: 3.4 million (2021)

Crypto adoption (% of population): 20.9 million (21%)

TLDR

Vietnam has historically maintained strict foreign exchange controls and prohibitions on cryptocurrencies. However, the government is gradually opening up to foreign investment and exploring crypto regulation. The young, tech-savvy population offers major growth potential if the regulatory environment can be clarified.

Exchange Controls

Vietnam has historically maintained strict controls and prohibitions on foreign exchange transactions and cross-border capital flows. However, regulations are gradually being updated to attract foreign investment in key sectors.

The State Bank of Vietnam (SBV) is the main regulatory authority overseeing foreign exchange management. All foreign investors looking to transfer capital in and out of Vietnam must follow the rules and procedures stipulated under the Law on Foreign Exchange Management.

To initially transfer capital into Vietnam, foreign investors must first establish a foreign-invested enterprise (FIE) and then open a capital account at a legally licensed and operational bank in Vietnam. This specialized account is specifically designed to closely track and monitor all inbound and outbound capital flows related to the foreign investment.

The investment capital contribution schedules are clearly outlined in the FIE’s joint venture contracts, charters, articles of association or business cooperation contracts, in addition to stipulations in the FIE’s investment license issued by authorities. Foreign investors must stringently abide by these capital contribution timelines and requirements to avoid any penalties or fines.

When foreign investors seek to transfer legitimately earned capital and profits out of Vietnam, they must follow a standardized procedure. The capital that can be transferred out includes legal capital, reinvestment capital, and capital associated with fulfilling business cooperation contracts. Profits can also be repatriated abroad after the fiscal year ends and all tax and financial obligations to the Vietnamese government have been paid.

The transfers of capital and profits must be conducted through the foreign currency capital accounts in a freely convertible currency, typically US Dollars or Euros. Any revenue legally earned in Vietnamese Dong (VND) must first be converted into foreign currency by an authorized bank before funds can be remitted overseas.

After fully meeting tax obligations, foreign invested enterprises can freely repatriate profits abroad without any withholding tax. However, the foreign exchange procedure must still be followed using approved banks and capital accounts.

Foreign invested enterprises can open four different types of bank accounts in Vietnam for their operations – foreign currency capital accounts, foreign currency deposit accounts, VND deposit accounts and VND business accounts. The foreign currency capital accounts specifically facilitate inbound and outbound transfers and transactions related to the foreign investment, while foreign currency deposit accounts allow foreign investors to easily deposit capital and profits for transfers in and out of Vietnam.

While regulations are still considered strict compared to other countries, the government aims to modernize the foreign exchange regime to attract more foreign capital inflows, especially into infrastructure development, natural resource projects and public-private partnerships.

Distribution Rules for Foreign Investment Products

Vietnam’s regulations related to the distribution and sale of foreign investment products and securities are primarily contained within the Law on Securities passed in 2019. This comprehensive law aims to develop the local capital markets in line with international standards, while protecting investor rights and ensuring transparency.

The State Securities Commission (SSC) serves as the main regulatory authority overseeing Vietnam’s securities markets and participants. The SSC has the power to issue detailed stipulations, instructions and circulars on specific areas within their purview.

For foreign investors and companies looking to participate in Vietnam’s securities landscape, the Law on Securities outlines a few key conditions:

• Foreign investors must comply with all limitations and caps on foreign ownership ratios in Vietnamese companies as specified in Article 51 of the law.
• Foreign companies can invest in and acquire up to 49% equity in local securities firms and fund managers without any additional conditions. Up to 100% ownership is possible after meeting certain criteria like having 2 years of operational experience in the sector.
• Foreign securities companies and fund managers are allowed to establish wholly owned branches in Vietnam after obtaining regulatory approval from the SSC.
• The scope of licenses issued to branches of foreign firms is more limited compared to local companies. The range of products and services they can freely offer is more restricted.

While the law does not explicitly prohibit or restrict the distribution and sale of foreign securities and investment products to Vietnamese investors, detailed regulations are also lacking in this area.

Any offerings of foreign securities in Vietnam must comply with the investment limits and restrictions applicable to public investment funds as contained in Article 110 of the Law on Securities.

Licensed securities companies and investment managers must also conduct the distribution and sale of foreign securities within the permitted scope of their issued license related to proprietary trading and investment activities, as specified in Articles 72 and 86.

Other general stipulations applicable to locally licensed securities firms and investment funds related to public offerings, private placements, information disclosure and reporting would also apply to any distributions of foreign investment products.

In summary, Vietnam’s regulatory stance on foreign investment products remains ambiguous. While not expressly prohibited, detailed regulations are lacking. The SSC may issue more comprehensive stipulations on this in the future. Compliance with investment limits, license scopes and reporting rules appears to be the key focus currently.

Qualified Investors

Vietnam’s Law on Securities passed in 2019 contains provisions defining and categorizing certain qualified and professional investors under Article 11.

The law aims to differentiate investors based on their financial capacity, investment experience, sophistication and professional qualifications. This is intended to identify institutional investors and high net worth individuals who have the resources and ability to understand complex securities investment products.

The main categories of qualified investors recognized in the law include:

• Banks, securities companies, fund management companies, listed firms, and investment funds with charter capital exceeding 100 billion VND, as specified in Article 11.1.a.
• Other companies, including unlisted joint stock companies, with charter capital over 100 billion VND as defined in Article 11.1.b.
• Individuals who hold valid professional certification related to the securities sector, as stipulated in Article 11.1.c. This covers certifications like fund manager, investment advisor, securities analyst, etc.
• Individual investors directly holding listed or registered securities worth at least 2 billion VND can qualify as professional investors under Article 11.1.d.
• Under Article 11.1.dd, individuals with taxable personal income exceeding 1 billion VND in the latest fiscal year can also qualify as professional investors.

By defining professional investor status based on sophistication, resources and experience, Vietnam aims to differentiate between retail investors requiring higher levels of protection and qualified investors who can accept relaxed regulations and access more complex products.

Qualified investors benefit from certain exemptions and relaxed rules around private placements, private funds, tender offers, ownership ratios, and information disclosure. The bifurcated rules aim to balance investor protection with facilitating capital flows from professional institutional and high net worth investors into local markets.

The thresholds aim to appropriately identify investors with adequate capacity and resources to assess risks associated with minimally regulated securities investments and markets. While limits are still imposed, qualified investors enjoy privileges suiting their higher risk tolerance and expertise.

Cryptocurrency Regulation

Vietnam currently does not have a comprehensive regulatory framework specifically addressing cryptocurrencies, blockchain technology and crypto assets. The legal status of cryptocurrencies remains ambiguous.

According to Decision No. 1255 issued by the Prime Minister in 2017, the issuance, supply and use of cryptocurrencies like Bitcoin as payment methods is considered illegal. This view was reinforced by the State Bank of Vietnam (SBV) which has declared cryptocurrencies do not fit the definitions of legal payment methods or digital currencies.

However, the government has taken steps more recently to study virtual assets and consider regulations. In 2018, the Prime Minister issued a directive mandating institutions like the SBV, Ministry of Finance and Ministry of Justice to research cryptocurrency impacts and enhance management.

The Ministry of Justice reviewed existing legislation and proposed policy ideas in 2019. The Ministry of Finance also formed a research group in 2020 to analyze virtual asset regulations.

The Vietnam Blockchain Association is working with the National Assembly to propose regulations like imposing taxes on income from virtual asset investments and trading. This could be a step towards formally recognizing cryptocurrencies as a new asset class.

Several delegates of the National Assembly have also advocated for defining a clear legal status for virtual assets and regulating cryptocurrency activities rather than imposing outright bans. They note that cryptocurrencies are being used in illegal activities like gambling rings and money laundering which need monitoring.

The Prime Minister has expressed urgency in establishing a regulatory framework given that virtual assets are actively being traded despite the lack of recognition. However, the government has to balance risks like financial crimes with supporting technological innovation.

Pilots of blockchain-based systems and discussions on a central bank digital currency are also underway. The young tech-savvy Vietnamese population has eagerly adopted cryptocurrencies for payments and investments, attracted by the high potential returns despite volatility and scam risks.