Friday, February 3, 2023

Vietnam Threatens Broader Crypto Crackdown after Fraud

Vietnam Threatens Broader Crypto Crackdown after Fraud

Vietnam is threatening to clamp down on digital currencies after Ho Chi Minh City-based Modern Tech JSC allegedly swindled $650 million USD from over 30,000 investors.

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Vietnam Suffers Token Scam

Modern Tech attracted funds through token sales of the Ifan and Pincoin cryptocurrencies. As the tokens plummeted in value, the promised monthly payouts to investors began to dwindle. The returns, which in Pincoin’s case promised to be up to “40 percent per month” were to be paid in fiat. When fiat repayments began being replaced by payouts in the tokens, investors became concerned the scheme was exactly what 40-percent-interest-per-month-schemes generally are – a scam.

The company and its management then seemingly disappeared, leaving investors scrambling for answers. Protestors outside the company’s headquarters in Ho Chi Minh City labeled the alleged fraud as “the biggest ever” in cryptocurrency.

Yet Another Exit Scam, but an Odd Response from the Government

The Vietnamese government instructed authorities to investigate the company. They then proceeded to take the extra step of increasing scrutiny over cryptocurrencies themselves. Prime Minister Nguyen Xuan Phuc instructed Vietnam’s central bank and the Ministry of Public Security to conduct better oversight of the “management of activities related to bitcoin and other cryptocurrency”.

Banks were to be banned from offering cryptocurrency payment services. The Ministry of Public Security was ordered to look deeper into ties between cryptocurrency and money laundering and terrorist financing. The Ministry of Justice was instructed to speed up the development of the legal framework for digital currencies.

A directive from the prime minister’s office stated that trading in digital currencies (as well as ICOs) could threaten “to affect the stability of the financial system, social order and safety and posed great risks to corporate and individual participants”.vietnam knee-jerk

More than a Knee-jerk Response

The Modern Tech JSC scheme was a classic ICO exit scam the likes of which the crypto world has become all-too-familiar with. Investors that continue to be attracted to 40 percent monthly returns deserve increasingly little sympathy in a real world where such returns always scream ‘fraud’, and particularly given the scale of criminality the nascent ICO industry has reached.

Yet the Vietnamese government’s response reads like a knee-jerk reaction on steroids as well as a reaction to problems that barely relate to the scam at all. Any time “social order” is mentioned as a rationale for regulation, citizens need to be fearful of a regime that risks treading too heavily on rights and, importantly in Vietnam’s promising entry into blockchain technology, innovation.

Cryptocurrencies are not considered legal tender in Vietnam, where only the Vietnamese dong can be used as a means of exchange. Despite this, owning cryptocurrencies is not actually illegal. At least not yet.

If one (albeit remarkably successful) scam manages to dampen Vietnamese enthusiasm for digital currencies, it would represent excessive government interference and a dumbfounding act of pointing fingers at the wrong target.

Is the Vietnamese government responding appropriately? Sound off in the comments section below.

Images via Pixabay 

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