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Inside Vietnam's crypto market: Generation Z, GameFi and Regulation

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Axie Infinity, Coin98, Finblox, Neko... More Vietnamese projects are entering the crypto market. It is estimated that nearly 6 million people in Vietnam, or about 6 percent of the population, have digital assets.

Original title:Explaining Vietnam "s Crypto boom"

Original source: Tech in Asia

Hersman, chain Catcher

Nam Nguyen joined the crypto craze in March 2021 and has already invested about $3,000. Being a novice actually has a bit of a special advantage, he says. "I don't see much, so I'm a bit of a 'fearless ignoramus' and a bit decisive in investing."

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

After Vietnam's restrictions were lifted, his business was back up and running. Now, some of the restaurant's revenue will feed more back into Nam's crypto bet. The 25-year-old doesn't mind that his crypto assets have recently lost about 46% of their value.

"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 missed the early trading hours of the stock market."

Given that Vietnam is still largely a cash-based society, its cryptocurrency adoption rate is surprisingly high.

According to TripleA, a cryptocurrency payment company,Nearly 6 million people, or about 6 percent of the population, own digital assets, ranking them among the top five in the world. Vietnam and India also top Chainalysis's global rankings for cryptocurrency adoption by individual investors.

Years ago, Vietnam's young and tech-savvy population skipped computers and went straight to mobile devices. Today, the same story is happening with cryptocurrencies. Though not endorsed by the government, virtual currencies have become a hot investment asset, especially among millennials and Gen Z. The pandemic and Axie Infinity contributed to the growing appeal of cryptocurrencies.

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

Who is using cryptocurrencies?

Trung Nguye joined the crypto market in 2014, but luckily exited before the cryptocurrency winter of 2018. He then returned in 2020 and now likes to stay afloat by reading and consulting different sources. "Right now, my portfolio is: 40% cryptocurrencies, 40% stocks and 20% savings," he added.

Compared to today's cryptocurrency traders, Trung, who was born in 1996, considers himself "old" because Gen Z is more market-savvy and some even "borrowed money from their parents to play cryptocurrency."

Similar to South Korea, cryptocurrencies are seen as a "way out" for young people, many of whom don't see a path to financial freedom even with a stable job. "Instead of working hard to get 20 million Dong ($870) a month, it's better to earn 10 million dong a day from cryptocurrency," Trung estimated.

Like-minded cryptocurrency traders are starting to huddle together, with a proliferation of online groups to communicate and share tips. While some of the latest scams like the NFT game CryptoBike are often reported, that's not enough to deter those looking to get rich quick on cryptocurrencies.

Nicole Nguyen, who has seen the local blockchain scene evolve over the past decade, is not surprised that encryption is gaining unprecedented traction in Vietnam.

Nicole noticed,There is a strong sense of "group culture" among local cryptocurrency adopters. This means that if someone senses an opportunity, they will usually grab a friend or family member to buy the coin.

"The pandemic has suppressed other business channels, which is why people want to bet on cryptocurrencies. The market is open and borderless," notes Nicole, co-founder of NFT project Duelist King and advisor to Blockchain Founders Fund.

Vietnam has been hit by another wave of outbreaks since late April 2021, with more than 2 million people infected and 35,975 killed as of January 18. Vietnam's economy will grow only 2.58% in 2021, down from 2.91% in 2020.

The lockdown has hit traditional investments such as real estate and gold. But even before the pandemic, they were often inaccessible to most people in the middle and lower income classes. Meanwhile, interest rates have been falling.

In addition to cryptocurrencies, retail investors are also piling into stocks. By November 2021, nearly 1.3 million new securities accounts had been opened, echoing a trend in places like India.

But for Duc Trinh, a young serial entrepreneur, Vietnam's domestic stock market lacks the flexibility of cryptocurrencies and the appeal of NFT, blockchain and Web3, or decentralized networks.

Trinh has established accessories maker Curnon Watch and eyewear specialist WeeHours as brands for younger consumers. In late 2021, he went on to co-found Neko, a converged investment app that aims to "democratize cryptocurrency investing." Trinh estimates that cryptocurrency adoption in Vietnam is growing seven times faster than the stock market.

When is the next Axie Infinity coming?

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

Sky Mavis, the startup behind Axie Infinity, is only three years old, but it's already far ahead of that goal. Its valuation has soared to $3 billion, and at one point last year, the game reportedly had nearly 2 million daily active users.

In the wake of the Axie phenomenon, teams in Vietnam have been racing to ride the crypto wave, with new GameFi projects coming to market almost every week.

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

AppWorks, which focuses on Taiwan and Southeast Asia, closed a $150 million funding round for its Fund III last August, with blockchain identified as a core investment theme.

As GameFi helps people outside the traditional banking system learn and adopt cryptocurrencies, Wakabayashi believes this trend will inspire the team to build other financial products as well.

That view is shared by Vietnam's wider tech community, and the crypto market is increasingly earning attention in the "mainstream."

Vinh The Nguyen, co-founder and CEO of Coin98, thinks it makes sense for GameFi to be The hottest category. "These projects may be more likely to generate revenue or be adopted by new users. But the concern is that resources should actually be allocated to teams that want to build something practical on blockchain," he said.

Founded in 2017, Coin98 allows users to trade, borrow, invest and earn cryptocurrencies. The team says it has more than 1 million users in more than 150 countries, with about 25 percent of them in Vietnam.

Coin98 started out as a blockchain and cryptocurrency research company, but turned to product building in 2019 after the cryptocurrency crash of 2018. The company also operates Coin98 Insights, a platform to spread knowledge of blockchain and cryptography in Vietnamese to novice and power users.

The startup says it wants to support users who can approach cryptocurrencies with critical thinking, not just for short-term profits. Vinh believes that such educational efforts are essential for the widespread adoption of decentralized finance (DeFi).

Coin98's vision is to build a super application for users to access the DeFi ecosystem, its CEO described it as "upgrading" what cryptocurrency exchange giant Binance is doing. Unlike Binance, however, Coin98 says it is "decentralized" : in simple terms, that means only users can control their assets.

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

Prior to that, the startup had raised about $16.5 million from investors, according to Crunchbase.

Anyway, "crypto is the first entry point for many Southeast Asians like Vietnam," said Peter Hoang, CEO and co-founder of crypto investment platform Finblox. "For the first time, they have access to global asset classes and are able to invest with the rest of the world."

Launched in November 2021, Finblox has raised funding from high-profile institutional investors like Sequoia India and CoinFund. The Hong Kong-based platform expects users to hold crypto assets and earn revenue, rather than simply trade them.

Finblox claims it can offer up to 10% annual returns for tokens like USDC and BTC, and even more for Axie. Finblox does this by lending cryptocurrencies to financial institutions.

Hoang estimates that despite the current hype, only about 2% of southeast Asia's population has been exposed to cryptocurrencies, and Finblox hopes to bridge that gap. "I believe cryptocurrencies are the best entry point into the investment world and access to exciting alternative financial systems," he added.

Grey area

Vietnam does not have a clear legal framework for cryptocurrencies, so the trading of such assets remains a grey area. Technically, users can rely on peer-to-peer exchanges like Binance to buy crypto assets from others.

Binance announced the launch of a peer-to-peer transaction service for Vietnamese dong (VND) early last year. Zhao Changpeng, CEO and founder of Binance, was quoted as saying that Vietnam could become"The Next Global Blockchain Hub".

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

In July 2021, the Vietnamese Prime Minister asked SBV to study cryptocurrencies and explore a pilot project. It's not clear what the project entails, but the goal is to "help governments discover both positive and negative aspects of cryptocurrencies," because that is'Inevitable Trend'.

Local news reports published last year said the plan could lead to the issuance of a "digital Dong," but unlike typical digital currencies, its value would still depend on the government's decision.

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

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

Indonesia allows cryptocurrency trading but does not recognize it as a method of payment. The Philippines is where Axie Infinity first took off, allowing the use of virtual currency to "buy virtual goods" and even "buy real goods from online stores/merchants."

Singapore also warned its citizens to be cautious about making decisions on digital investments such as NFT and Metasverse assets, Bloomberg reported. Its central bank also recently issued guidelines forbidding crypto companies from advertising their services to the public.

Meanwhile, despite being in a "so-called gray zone," Vietnamese cryptocurrency adopters are still in a "honeymoon period," as Duelist King's Nicole Nguyen describes it. But gray zones do not protect users and individual investors from fraud.

Other challenges include a self-correcting crypto market and the potential impact of the Fed's interest rate normalization.

Still, true supporters like Nicole hope the trend will eventually lead to a real-world use case for Vietnamese blockchain technology.

AppWorks' Wakabayashi sees the same potential in Vietnam. Vietnam has long been known for having a strong technical talent pool.

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