Cryptocurrencies in Vietnam

Vietnam is going to have a cryptocurrency exchange. Right at the end of the bitcoin hype cycle, so at least they are on trend!

SOURCE: WALLETHUB.COM MORE DETAILS HERE

It is quite difficult to understand exactly what is going on with this exchange, but it appears Kronn Ventures want to do something about high exchange rates between currencies. That seams a worthy goal. If you look at the cost of converting money, it is outrageous. If you do it carelessly, it could cost you more than 15%.

But cryptocurrencies don’t seem to be the best way to solve that problem, because it can be quite expensive to use them in exchange. The problem right now is that you would have to pay the exchange fees on two transactions. Let’s say you have money in Vietnamese dong, but want to visit Thailand and need baht. First, you need to convert Vietnamese dong to bitcoin or whatever cryptocurrency is created/used. Then transfer that to an account either in Thailand or in Vietnam. Then convert your bitcoin into Thai baht. Of course there are probably ways to bypass all of this if the service just automatically made the exchange behind the scenese using the cryptocurrency as just the base. The could potentially set low transaction fees as long as they weren’t taking too much risk.

Basically if there were too many dong coming into the exchange but not enough baht, then the currencies wouldn’t be netted out at the end of the day/hour/minute. The exchange itself could be unwittingly long dong, and it would need to somehow offload this risk in order to make sure that they weren’t just a passive speculator on currencies.

International currency exchange companies already do all of this pretty well. All it would take is to charge a bit less for their service to compete with this new exchange. And wouldn’t someone just go to the more reputable brand?

THIS LEVEL OF VOLATILITY IS A TOUGH SELL.

I follow Matt Levine religiously, and he has this view that most cryptocurrency uses could just as easily be done by a robust and trusted centralized database. Of course there are some cases when having a distributed ledger is actually an improvement, like here.

But back to Vietnam, the actual press release is pretty vague, and I doubt that anything will come of this. The government made cryptocurrencies illegal after $660m were stolen from hapless Vietnamese investors. That’s a crazy amount for Vietnam. And a little less than a year ago, the government shut down the largest bitcoin exchange, Bitcoin.vn.

Plus, isn’t Bitcoin over? Prices of all cryptocurrencies are down 85%, and the chart itself looks scary. It was worth almost $20,000 and now is worth less than $4,000. There have been so many scams, including the death of someone that resulted in $137m in cryptocurrencies stranded/lost. Or that was the initial story, and then maybe the currency was already gone from the account…and maybe the guy didn’t die…

Anyway, there is a lot of sketchy behavior around ICOs and cryptocurrencies. Plus a lot of very strong opinions on both sides. My view is that having a deflationary currency is a bad idea. Plus, if bitcoin is only going to be used for ransom, then no thanks.

Maybe the Vietnamese government will ultimately decide that they do want to lead the world in cryptocurrencies, and they will start an exchange. But given how untraceable cryptocurrencies generally are, then it seems unlikely that the Vietnamese government will be so excited about it. Let’s see.