Vietnam's Crypto Prosperity: Banding Together for Warmth, Potential GameFi Stocks, and Gray Areas

Source: Tech in Asia

*Original Title: 《 Explaining Vietnam's crypto boom *》

Compiled by: Hailsman, Chain Catcher

Nam Nguyen joined the crypto craze in March 2021 and has invested about $3,000. He said that as a newcomer, he actually has a bit of a special advantage. "I don't watch much, so I'm a bit 'ignorant and fearless,' which makes me more decisive when investing."

Nam ultimately made enough money from cryptocurrency to save his restaurant in Ho Chi Minh City, Vietnam. His restaurant was closed for several months during the pandemic.

After the restrictions in Vietnam were lifted, his business resumed operations. Now, part of the restaurant's revenue will further support Nam's crypto bets. The 25-year-old is unfazed by the recent 46% devaluation of his crypto assets.

"Unlike the stock market, the crypto world is more convenient for me because it's 24/7," he told Tech in Asia. "I often wake up late, which means I've already missed the early trading hours of the stock market."

Considering that Vietnam is still primarily a cash-based society, the adoption rate of cryptocurrency is surprisingly high.

According to data from crypto payment company TripleA, nearly 6 million people (about 6% of the population) own digital assets, ranking among the top five in the world. Vietnam and India also rank high in Chainalysis's global ranking of individual investors adopting cryptocurrency.

Years ago, young and tech-savvy people in Vietnam skipped computers and went straight to mobile devices. Today, the same story is happening with cryptocurrency. Despite not being recognized by the government, virtual currencies have become a popular investment asset, especially among millennials and Gen Z. The pandemic and Axie Infinity have contributed to the growing appeal of cryptocurrency.

Forget real estate and gold. For a time, everyone was "playing" with coins.

Who is using cryptocurrency?

Trung Nguyen entered the crypto market in 2014 but fortunately exited before the crypto winter of 2018. He returned in 2020 and now enjoys keeping up with the market by reading and consulting various resources. "Currently, my portfolio is: 40% cryptocurrency, 40% stocks, and 20% savings," he added.

Born in 1996, Trung feels "old" compared to today's crypto traders, as Gen Z is more knowledgeable about the market, with some even "borrowing money from their parents to play with cryptocurrency."

Similar to South Korea, cryptocurrency is seen as a "way out" for young people here, many of whom do not see a path to financial freedom even with a stable job. "Rather than working hard for 20 million VND (about $870) a month, I'd rather earn 10 million VND a day from cryptocurrency," Trung estimated.

Like-minded cryptocurrency traders have begun to band together, with a surge in online groups for exchanging and sharing tips. Although some recent scams like the NFT game CryptoBike have been frequently reported, this has not deterred those looking to get rich quickly from cryptocurrency.

Nicole Nguyen has witnessed the evolution of the local blockchain scene over the past decade and is not surprised by the unprecedented appeal of crypto in Vietnam.

Nicole noted that there is a strong sense of "community culture" among local cryptocurrency adopters. This means that if someone perceives an opportunity, they generally bring friends or family along to buy the coin.

"The pandemic has suppressed other business channels, which is why people want to bet on cryptocurrency. This market is open and borderless," Nicole mentioned, who is also a co-founder of the NFT project Duelist King and serves as an advisor to the Blockchain Founders Fund.

Since late April 2021, Vietnam has been hit by another wave of the pandemic, with over 2 million infections and 35,975 deaths reported as of January 18. Vietnam's economy grew only 2.58% in 2021, down from 2.91% in 2020.

The lockdowns triggered by the pandemic hit traditional investment methods like real estate and gold hard. But even before the pandemic, most middle- and low-income individuals typically could not access them. Meanwhile, interest rates have been declining.

In addition to cryptocurrency, retail investors have also flocked to the stock market. By November 2021, nearly 1.3 million new securities accounts had been opened, mirroring trends in places like India.

But for young serial entrepreneur Duc Trinh, the domestic stock market in Vietnam lacks the flexibility of cryptocurrency and the appeal of NFTs, blockchain, and Web3 (or decentralized networks).

Trinh has established accessory manufacturer Curnon Watch and eyewear expert WeeHours as brands for young consumers. At the end of 2021, he co-founded Neko, an aggregation investment app aimed at "democratizing cryptocurrency investment." Trinh estimates that the adoption rate of cryptocurrency in Vietnam is growing at seven times the speed of the stock market.

When will the next Axie Infinity arrive?

The global success of Axie Infinity has put Vietnam's gaming industry in the spotlight, which is under pressure to produce the next Flappy Bird, a once-addictive mobile casual game.

The startup behind Axie Infinity, Sky Mavis, was founded just three years ago but has already far exceeded this goal. Its valuation has soared to $3 billion, and reports indicate that at one point last year, the game had nearly 2 million daily active users.

Related Reading: 《How did Axie Infinity founder Trung Nguyen create a game with over 2.6 million daily active users?》

Following the Axie phenomenon, teams in Vietnam have been scrambling to ride the wave of crypto gaming, with new GameFi projects entering the market almost weekly.

Jun Wakabayashi, a partner at venture capital firm and accelerator AppWorks, believes that GameFi becoming a "major event" in Vietnam is no coincidence. "Even before this crypto hype, Vietnam was already very strong in casual and semi-casual gaming. But that's just the tip of the iceberg," he said.

AppWorks primarily focuses on Taiwan and Southeast Asia, and completed a $150 million fundraising for its Fund III last August, with blockchain identified as a core investment theme.

With the boost from GameFi, people outside the traditional banking system are beginning to learn and adopt cryptocurrency, and Wakabayashi believes this trend will also inspire teams to build other financial products.

The broader tech community in Vietnam shares the same view, with the crypto market increasingly gaining attention in the "mainstream."

Vinh The Nguyen, co-founder and CEO of Coin98, believes it makes sense that GameFi has become the hottest category. "These projects may be easier to generate revenue or be adopted by new users. But what’s concerning is that resources should actually be allocated to teams that want to build practical products on the blockchain," he said.

Coin98 was founded in 2017 and allows users to trade, lend, invest, and earn cryptocurrency. The team claims to have over 1 million users in more than 150 countries, with about 25% coming from Vietnam.

Coin98 initially started as a blockchain and cryptocurrency research company but pivoted to product building in 2019 after experiencing the crypto crash of 2018. The company also operates Coin98 Insights, a platform for disseminating Vietnamese blockchain and crypto knowledge to beginners and advanced users.

The startup states that it aims to support users who can approach cryptocurrency with critical thinking, rather than just for short-term profits. Vinh believes that this educational effort is crucial for the widespread adoption of decentralized finance (DeFi).

Coin98's vision is to build a super app for users to access the DeFi ecosystem, which its CEO describes as an "upgrade" of what cryptocurrency exchange giant Binance has done. However, unlike Binance, Coin98 claims to be "decentralized": simply put, this means that only users can control their assets.

In fact, Binance recognizes Coin98's efforts. The global platform's venture capital and incubation arm, Binance Labs, recently announced a strategic investment in Coin98.

According to data from Crunchbase, prior to this, the startup had raised about $16.5 million from investors.

Regardless, "crypto is the first guide for many Vietnamese and Southeast Asians to enter investing," said Peter Hoang, CEO and co-founder of crypto investment platform Finblox. "For the first time, they can access global asset classes and invest alongside the rest of the world."

Finblox launched in November 2021 and has already raised funds from well-known institutional investors like Sequoia India and CoinFund. The Hong Kong-based platform is more focused on having users hold crypto assets and earn yields rather than just trading.

Finblox claims to offer annual yields of up to 10% for tokens like USDC and BTC, with even higher yields for Axie. Finblox lends cryptocurrency to financial institutions to achieve this.

Hoang estimates that despite the current hype, only about 2% of the Southeast Asian population has been exposed to cryptocurrency, and Finblox hopes to bridge this gap. "I believe cryptocurrency is the best entry point into the world of investing and can access an exciting alternative financial system," he added.

Gray Area

Vietnam does not have a clear legal framework regarding cryptocurrency, so trading these assets remains in a gray area. Technically, users can rely on peer-to-peer exchanges like Binance to buy crypto assets from others.

At the beginning of last year, Binance announced the launch of P2P trading services for the Vietnamese dong (VND). Quoting Binance CEO and founder Changpeng Zhao, he stated that Vietnam could become "the next global blockchain hub."

However, in 2018, the State Bank of Vietnam (SBV) issued a statement banning all transactions related to cryptocurrency through the banking system. This means users cannot use banks to purchase or exchange crypto assets.

In July 2021, the Prime Minister of Vietnam requested the SBV to study cryptocurrency and explore a pilot project. It is still unclear what this project will entail, but the goal is to "help the government discover the positive and negative aspects of cryptocurrency," as it is an "inevitable trend."

Local news reports released last year indicated that the plan could lead to the issuance of a "digital Vietnamese dong," but unlike typical digital currencies, its value would still depend on government decisions.

While this is a hopeful sign, specific policies regarding cryptocurrency in Vietnam may not be forthcoming soon. The industry is still waiting for a fintech sandbox.

In the early stages, most Southeast Asian governments are also unclear about how to regulate cryptocurrency and other digital assets.

Indonesia allows the trading of cryptocurrency but does not recognize it as a means of payment. The Philippines, where Axie Infinity first rapidly rose, allows the use of virtual currencies to "purchase virtual goods" and even "buy real goods from online stores/merchants."

According to Bloomberg, Singapore has also warned the public to be cautious in making decisions on digital investments like NFTs and metaverse assets. Its central bank recently released guidelines prohibiting crypto companies from promoting services to the public.

Meanwhile, despite being in a "so-called gray area," cryptocurrency adopters in Vietnam are still in a "honeymoon phase," as described by Nicole Nguyen of Duelist King. However, the gray area does not protect users and individual investors from scams.

Other challenges include the self-correction of the crypto market and the potential impact of the Federal Reserve's normalization of interest rates.

Nonetheless, true supporters like Nicole hope that this trend will ultimately promote practical use cases for blockchain technology in Vietnam.

Wakabayashi from AppWorks sees the same potential in Vietnam. For a long time, Vietnam has been known for having a strong pool of tech talent.

"As we saw in 2018, once this hype cycle passes, projects with weak fundamentals may not emerge after the dust settles," he said. "**The beauty of Web3 is that it is a developer's world. If you have a technical background, then the *hope right now is limitless.*"

Related Reading: 《After the explosion of Polygon, India moves towards becoming a center of the crypto world》