Vietnam Takes Bold Steps to Clear Cryptocurrency Missteps with Strategic Reforms

Vietnam’s New Crypto Law: A Leap towards Digital Economy Hub Status

The Vietnamese National Assembly has approved the long-awaited Law on Digital Technology Industry, effective January 1, 2026. This significant milestone marks Vietnam’s effort to meet Financial Action Task Force (FATF) standards after being gray-listed in 2023 due to Anti-Money Laundering (AML)/Countering the Financing of Terrorism (CFT) deficiencies. The law distinguishes between crypto assets and virtual assets, excluding Central Bank Digital Currencies (CBDCs) and securities.

The new law brings clarity to Vietnam’s fast-growing cryptocurrency sector by mandating identity checks, transaction monitoring, and reporting obligations to detect and prevent digital asset fraud. Effective implementation will address enforcement gaps in the AML/CFT framework. By regulating its crypto sector, Vietnam aims to exit the FATF gray list, boost investor confidence, and position itself as a leading digital economy hub in Southeast Asia.

Understanding the FATF’s Role

The Financial Action Task Force (FATF) is an international organization founded in 1989 by the G7 group of seven advanced economies. The FATF creates policies and oversees their adoption in member countries to prevent money laundering, terrorist financing, and other threats to the financial system. It provides recommendations for shaped national laws and assesses compliance through peer reviews.

Countries that fail to meet these standards may be placed on a "gray list" or "blacklist," harming their global financial reputation and investment environment. By complying with FATF rules, Vietnam aims to attract global venture capitalists (VCs) and crypto exchanges, leveraging regulatory clarity as an economic development tool.

Vietnam’s FATF Gray List Status and Steps towards Financial Reform

In 2023, Vietnam agreed to address significant deficiencies in its AML/CFT measures after being placed on the FATF gray list. The FATF cited issues such as inadequate supervision of financial institutions, weak Customer Due Diligence (CDD), and insufficient regulation of virtual asset service providers. To exit this list, Vietnam must fully implement an FATF action plan by strengthening AML laws, improving regulatory oversight, enhancing CDD, and ensuring effective prosecution of financial crimes.

The FATF monitors progress through updates and on-site visits. Once compliance is demonstrated, member states vote in a plenary session to decide on removal, signifying renewed trust in the country’s financial integrity. Vietnam’s Law on Digital Technology Industry represents a critical step towards aligning its digital asset sector with FATF standards on AML and CTF.

Vietnam’s Law on Digital Technology Industry: Essential Components

The law comprises various sections that are crucial for regulating the crypto sector:

• Ambitious growth targets: Creating 150,000 digital tech firms by 2035 under the "Make in Vietnam" initiative.
• Defined categories: Crypto assets (e.g., Bitcoin, Ether) and virtual assets (non-financial digital items), excluding CBDCs and securities.
• Strong incentives:
  • Tax breaks
  • Grants
  • Import duty exemptions for startups, SMEs, and foreign tech investors
  • Vietnamese digital experts get five years of tax exemption
    • Foreign experts receive five-year visas and no work permit requirement

The law introduces a risk-based AI framework and legal rules for crypto and virtual assets. It also enables regulatory sandboxing, allowing controlled testing of blockchain technologies to foster innovation.

A Closer Look at Vietnam’s Crypto Law

The law divides digital assets into two categories:

• Virtual Assets: Non-financial digital items used for exchange or investment. These exclude securities, CBDCs, fiat currencies, and traditional financial instruments.
• Crypto Assets: Digital assets that use encryption or blockchain technologies to manage issuance, transfer, and storage.

This classification facilitates a structured legal framework that enables regulated use of these assets while differentiating them from mainstream financial products. The government has been tasked with licensing, oversight, and operational guidelines for each category.

Key changes for crypto startups include legal recognition, regulation, and tax incentives. Provisions for pilot sandbox mechanisms are available for virtual asset products and services, along with workforce training programs and subsidies for blockchain startups.

Vietnam’s Compliance Strategy: Addressing FATF Concerns

The law has been designed to address the FATF’s concerns in several areas:

• Crypto officially legalized: Ending legal ambiguity by recognizing crypto ownership and use.
• Defined categories: Separating crypto assets (like Bitcoin, Ether) from virtual assets (non-financial digital items), enabling more precise risk-based regulation per FATF guideline.
• AML and CFT integration: Enhancing regulatory oversight of customer due diligence to prevent illicit finance.
• Stablecoins excluded: Regulating fiat-backed stablecoins separately under financial laws to ensure consistent oversight.

Unlocking Digital Innovation in Vietnam

Vietnam’s Law on Digital Technology Industry represents a significant step towards its goal of becoming a digital technology hub in Southeast Asia. By recognizing crypto assets and offering incentives such as tax reductions, grants, and subsidies for R&D in semiconductors and cloud technology, the government is creating opportunities for tech companies to set up shop here.

In addition to recognizing crypto assets. The law includes provisions regulating virtual assets used for exchange or investment.

These changes are part of Vietnam's broader efforts to become a leading tech hub in Southeast Asia by leveraging its digital skills, R&D capacity and a more stable economic climate as compared with neighboring countries.

It aims to create a favorable environment that promotes innovation which is critical to the nation's future growth.