Vietnam has officially defined electronic money for the first time, but has excluded virtual currencies from its definition

Decree 52, which will come into effect on July 1, 2024, provides a precise definition of electronic money (e-money) in Vietnam as "the equivalent value in VND stored electronically," utilizing prepaid funds offered to banks or payment service organizations that provide electronic wallet services.

According to the decree, e-money can be stored through electronic wallets (e-wallets) and prepaid cards.

The State Bank of Vietnam (SBV) has specifically excluded virtual currencies from the scope of this decree as they are not regulated by the country's financial authorities.

Decree 52 was issued by the Vietnamese government on May 15, 2024, and will replace Decree 101/2012/ND-CP on non-cash payments, as well as Decree 80/2016/ND-CP on amendments to the Government's Decree 101/2012/ND-CP on non-cash payments. Additionally, Decree 52 will lead to the expiration of Article 3 of Decree 16/2019/ND-CP, which pertains to amending, supplementing, and abrogating certain articles of Decree 101/2012/ND-CP on non-cash payments.

Decree 52: Key Provisions on the Definition of E-money in Vietnam

The recent decree defines e-money as the digital representation of Vietnamese Dong (VND) value, which is based on the amount of money prepaid by customers to banks, foreign bank branches, and payment intermediary service providers offering electronic wallet (e-wallet) services. E-wallet services, as defined by the Vietnamese government, are provided by banks, foreign bank branches, and payment intermediary service providers to facilitate money deposits, withdrawals, and payment transactions for their customers.

Vietnam currently has over 40 e-wallet providers and e-payment services from commercial banks, with approximately 36 million active e-wallets reported by FiinGroup as of April 2024. The country has not officially permitted or explicitly prohibited digital currencies and virtual assets. Article 6 of Decree 52 specifies that e-money can be stored using e-wallets and prepaid cards.

Under the new regulation, banks and foreign bank branches are permitted to issue and offer e-wallets and prepaid cards. The issuance and use of these e-wallets and prepaid cards must adhere to the guidelines set by the State Bank of Vietnam (SBV).

Payment intermediary service providers that offer e-wallet services must ensure that the combined balance in all bank accounts supporting payments for their e-wallets is equal to or greater than the total balance of all e-wallets issued to customers. These providers are only allowed to provide services to e-wallets associated with customers' payment accounts or debit cards.

Payment intermediary service providers, who are authorized to offer e-money transfer support services under Clause 5, Article 3 of Circular 39/2014/TT-NHNN, are allowed to continue providing their services according to existing agreements until Decree 52 becomes effective.

The State Bank of Vietnam has highlighted the importance of Decree 52 in defining e-money in Vietnam for the first time, as it will help prevent and eliminate unauthorized payment methods and support authorities in addressing related legal violations.

Article 34 of Law 14/2022/QH15 on Anti-Money Laundering pertains to wire transfers and electronic funds transfers. Reporting entities are required to report any transactions involving the transfer of electronic money (e-money) to the State Bank of Vietnam (SBV) if the value of each transaction exceeds the limit set by the Governor's regulations. When participating in e-money transfers, reporting entities must implement risk management policies and procedures to either carry out, reject, temporarily suspend, or conduct post-transaction control. Additionally, they are responsible for verifying the accuracy and completeness of the information in e-money transactions and reporting any suspicious activities.

Further regulations regarding cross-border payments in Decree 52

Decree 52 has established regulatory provisions to clarify the following:

- The definition of international payments and international payment systems;

- The role of the SBV in managing international payments;

- Regulation of service provision activities from abroad to Vietnam and from Vietnam to abroad, including the implementation of international financial switch services;

- The approval process for commercial banks and foreign bank branches to participate in international payment systems, and the conditions for approval; and

- The responsibilities of related parties in providing comprehensive and timely information and meeting the requirements of state management agencies under Vietnamese law to manage cross-border transaction flows.

The SBV states that these regulations will enhance the management role of relevant state agencies in international payment activities. Furthermore, the regulations promote partnerships in providing cross-border payment services in the midst of rapid technological advancements and innovations that support e-commerce.

Changes and additions to regulations regarding payment accounts

Decree 52 has been revised to update and enhance various aspects of the rules governing payment accounts in order to better reflect current practices. These revisions cover the following areas:

- Rules for opening and utilizing payment accounts;

- Permission to utilize payment accounts;

- Procedures for blocking payment accounts and managing them after they have been unblocked; and

- Circumstances surrounding the closure of payment accounts and the handling of remaining balances upon closure.

Furthermore, Decree 52 introduces new regulations for providing payment services without utilizing customers' payment accounts for businesses that offer public services. It also revises and supplements regulations pertaining to payment intermediary services.

Cashless transactions in Vietnam are on the rise, leading to an increase in payment volume

In the first four months of 2024, there was a significant increase in non-cash payment indicators compared to the same period in 2023. The volume of non-cash payment transactions grew by 51.11 percent and the value grew by 39.49 percent. Transactions through Internet channels increased by 47.48 percent in volume and 30.20 percent in value, while transactions via mobile devices grew by 59.26 percent in volume and 35.91 percent in value.

On the other hand, ATM transactions continued to decrease, with a 14.15 percent decline in volume and a 7.84 percent decline in value, indicating a clear shift from cash to non-cash payments in Vietnam.

The Payment Department of the SBV notes that cashless payment indicators have been rapidly accelerating. From 2021 to 2023, the average volume of payment transactions in Vietnam through the Internet and mobile devices grew by 52 percent and 103.3 percent, respectively. During the same period, the volume and value of payments made via QR codes increased by over 170 percent.

By the end of 2023, Vietnam had over 182 million personal payment accounts, with approximately 87.08 percent of adults owning payment accounts. Additionally, 40 banks reported the official implementation of nearly 35 million active eKYC payment accounts, which are electronic Know Your Customer (eKYC) accounts that use an automated process to digitally verify customer identities.

Conclusion

The State Bank of Vietnam (SBV) highlights the importance of Decree 52 as a vital legal instrument for non-cash transactions in Vietnam and anticipates that it will have a substantial influence on related issues. The decree plays a key role in establishing a solid legal framework for cashless payments, facilitating the digital transformation of the banking industry. It is in line with Vietnam's international obligations and aims to promote secure, modern payment methods through the adoption of information technology. Decree 52, together with the Law on Credit Institutions 2024, is set to be effective from July 1, 2024.