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Legal notes on the blockchain industry in Vietnam

In recent years, with the young population making up the majority, the game market in Vietnam has been vibrant and full of potential to attract investors. Accordingly, with the development of technology, traditional games are gradually brought up with more modern and advanced technologies, especially Blockchain technology with the origin of NFTS (Non-Fungible Tokens) games. This is showing that Vietnam is a country with great potential for development and is considered capable of becoming the world’s blockchain game capital. However, at present, in Vietnam, there are still many barriers and difficulties that make technology difficult to develop and greatly affect the investment decisions of investors in blockchain game projects in Vietnam.

How does the blockchain game industry work in Vietnam now?

The first thing we need to know what a blockchain game is and how it works and operates. Accordingly, a blockchain game (also known as a NFT game or a crypto game) is a video game that includes elements that use cryptography-based blockchain technologies. Blockchain elements in these games are most often based on the use of cryptocurrency or non-fungible tokens (NFTs) which players can buy, sell, or trade with other players, with the game publisher taking a fee from each transaction as a form of monetization.

A good example for this game is NFT Axie Infinity which is an online game where Pokemon-like creatures live, grow, fight as normal online game. However, it is special that each of these characters is a generated non-fungible token (NFT). If someone wants to play the game, players have to buy three NFT characters with real money that is over US$ 400.00. But once they are purchased, the player owns the character they purchased, especially players can earn money from this game. The game is now considered the most expensive NFT game of all time with a record period of more than one million players every day around the world, a total market capitalization of US$ 8.50 billion.

Based on the development of this hit game, the blockchain game market in Vietnam is getting more attention and popularity, thereby attracting many investors to contribute to the development of blockchain game projects in a powerful way and as a result a series of blockchain game projects are developed and born in Vietnam.

In addition, the number and time of mobile phone users playing games in Vietnam is extremely large with 57% of 68 million mobile users for average time of 3,9 hours (regarding App Annie’s statistics in 2020). Accordingly, Vietnam ranks 2nd position in Southeast Asia in terms of game download market share (22%), only after Indonesia (38%) whereby showing that Vietnam is a fertile ground for the development of the game industry in general and NFTs games in particular.

Legal perspective on the blockchain industry in Vietnam
Legal notes on the blockchain industry in Vietnam

Another advantage to help Vietnam become a potential place for blockchain technology is that an abundant human resource with diverse choices and low cost will help blockchain game projects to be operated without too much financial difficulties. Moreover, according to statistical data from Stalin, Vietnam ranks in the top 10 countries that own the most cryptocurrencies in the world, and this is also a basis for promoting the development of games associated with Non-Fungible Tokens and cryptocurrency.

In addition, blockchain technology is receiving much support and attention from the Government of Vietnam when considering Blockchain as one of the digital technology fields on the priority list of research, development and application to proactively Join the Industrial Revolution 4.0. Accordingly, the Ministry of Science and Technology has issued Decision No. 2813/QD-BKHCN approving the National Key Science and Technology Program for the period up to 2025, in which Blockchain is ranked second after artificial intelligence (AI) in a wide range of key technology products. Therefore, the blockchain game market in Vietnam promises to have big booms in the future.

Challenges to the development of the blockchain game industry in Vietnam

Apart from the advantages to develop the blockchain game industry, Vietnam also has barriers and difficulties that make investors hesitate to invest in this market.

Firstly, although there is an abundant human resource, Vietnam does not have many blockchain experts in Vietnam and most of the human resources come from other industries such as apps development or normal game development. This leads to a lack of foundation along with a lack of patience that will create negative consequences affecting the development of the project, and thereby loses reputation to investors investing in projects.

Secondly, the infrastructure for the development of the blockchain game industry is still limited since the technologies are usually only for the development of normal online games and apps. Hence, the blockchain game has not been properly invested to implement a long-term and sustainable blockchain game project.

Thirdly, although there are many projects that have achieved certain successes not only in the domestic but also international markets, many blockchain game projects in Vietnam still lack transparency in operation and even game projects that are accused of having a fraudulent mark to profit as a general trick such as secretly selling tokens that should be locked, but the founders of these projects said that they were hacked which lead to the loss of tokens, doing not give a clear development roadmap or tanking the names of reputable people to include in the development team to gain the trust of investors, which may lead to the loss of investors’ assets. This causes investors’ confidence to be shaken violently and may unintentionally adversely affect projects that are being seriously implemented and developed in Vietnam.

Fourthly, another important barrier that makes investors not interested in blockchain game projects in Vietnam is the fact that Vietnam currently does not have a legal framework for blockchain technology and cryptocurrencies, thereby does not have a mechanism to protect investors when investing in blockchain game projects. Indeed, in nature, NFT games are using tokens with applying blockchain technology but not use real money for transactions in fact, so they may be not illegal according to Vietnamese Law. However, the most sensitive problem is that the tokens or virtual currency generated by the game can be exchanged and withdrawn for real money (Cash Out), which is not allowed in traditional games, and also is not allowed in NFT games. This may lead to a violation of the law for these games. Besides, creating cryptocurrencies from the game to trade, buy, sell or exchange with other accounts or use it as a means of payment is also not allowed by Vietnamese law. Therefore, at present, that is why there are not any licensed NFT game production companies in Vietnam and instead mainly investors choose Singapore or the US to invest in. Hence, this is the biggest barrier to invest in blockchain game projects.

Finally, enforcement of intellectual property (IP) law in Vietnam does not live up to the expectations of investors of blockchain game projects in Vietnam. Although the IP Law of Vietnam is comprehensive and generally consistent with international standard, Vietnam still lacks guideline on certain IP issues, especially digital transformation, AI and blockchain. Besides, administrative officials and even judges in Vietnam still have limited expertise on IPR-related matters and sometimes cannot keep up with the rapidly changing laws.  These lead to the fact that the infringements of IP rights are being handling ineffectively, especially for unregistered intellectual property rights such as copyright which play an important role for rights of holders of game project.

Currently, to implement blockchain game projects, Vietnamese founders often choose Singapore to open a company because Singapore has a clear blockchain legal mechanism and is a place that can attract many investors to develop projects. Indeed, in Singapore, the Monetary Authority of Singapore (MAS) has begun to review the implementation of legislation regulating the administration and use of virtual reality. The MAS is also considering creating a regulatory framework for those interested in establishing initial coin offering (ICOS) cryptocurrency funds. Moreover, Singapore is one of the few countries in the world to have a blockchain and cryptocurrency industry association dedicated to small and medium-sized enterprises (SMEs) operating in the space – ACCESS – Association of Crypto Currency Enterprises and Start- ups Singapore.

Blockchain in general and NFTs games in particular are fertile ground for investors, thereby promoting economic development as well as promoting Vietnam’s 4.0 technology revolution in accessing this field. In general, the blockchain field is an extremely exciting field and there is not too much difference between Vietnam and big countries like China and the US. This is a favorable condition for Vietnam to pioneer and take the lead in exploiting and developing this potential market. To do that, the Government and Ministries need to step up the creation of a legal framework for blockchain and cryptocurrencies, promote human resource training as well as connect economic resources. If there are more successful NFTs game projects, Vietnam will not only attract foreign currency from investors around the world, but also affirm the prestige of Vietnamese engineers in the global blockchain community.

Lawyer Pham Duy Khuong, Nguyen Thuy Chung, Doan Nam, ASL LAW

ASL LAW is the top-tier Vietnam law firm for Investment Services. If you need any advice, please contact us for further information or collaboration.

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