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- 1 Vietnam is going through an economic slowdown
- 2 The situation is expected to get better in the second half of 2023.
The International Monetary Fund (IMF) released their Article IV Mission to Vietnam report, indicating the Southeast Asian country might witness economic slowdown. The nation is currently the biggest nation in terms of crypto adoption according to blockchain analysis firm Chainalysis, with nearly 20 Million users in the country. The current scenario may lead more Vietnamese citizens to turn to digital assets. However, every rose has its thorns and might cause a declining adoption rate.
Crypto Adoption in Vietnam is Driven By P2E
Paulo Medas of IMF said, “Vietnam experienced a strong post-pandemic economic recovery in 2022. GDP rose by a historically high 8 percent, driven by strong domestic and external demand. Average inflation was contained at 3.2 percent, although price pressures picked up steadily during the year.” He added, “The recovery was interrupted by strong external and domestic headwinds.”
After a strong recovery in 2022, 🇻🇳Vietnam's economic growth will slow from 8% to 4.7% in 2023. Given large headwinds, policy mix needs to focus on safeguarding financial stability and providing fiscal support to the economy & the most vulnerable. https://t.co/UXawvS0ISo pic.twitter.com/E8rQgxW5Ip
— IMF (@IMFNews) June 30, 2023
The slowdown in the first half of 2023 is expected to catch a pace in the second. The report also mentioned a depositor run happened with Saigon Joint Stock Commercial Bank (SCB). Users started withdrawing funds after the bank raised the deposit rate for yearly deposits to a whopping 8.55%.
High loan-to-deposit ratio may force Vietnam’s banks to maintain tight policies. Moreover, global rates are not expected to come down, thereby increasing the probability for the ratio to remain the same in the long run. This may prove to be a critical inflection point for crypto adoption in the country.
Mr. Medas suggests fiscal policy should consider vulnerable groups in the country more. On one hand, the banking sector’s uphill battle in bringing financial stability could lead the citizens to turn to crypto, however, cyber threats associated with digital assets could do just the opposite. A rise in the frequency of scams may restore people’s confidence in the banks.
Vietnam Makes 5% of the Global Crypto Population
Unlike Bitcoin’s (BTC) objective, crypto adoption in Vietnam is primarily driven by play-to-earn gaming. Still, around 30% of the crypto users in the nation hold the king coin in their wallets. Axie Infinity, a web3 game developed by Vietnamese company Sky Mavis, has over almost 500K users in the country.
According to a survey conducted by data aggregator Statista, 21% of Vietnamese residents use or own cryptocurrencies. Vietnam makes almost 5% of the global crypto population currently. There’s currently no tax on digital assets. However, the government is yet to accept digital assets as legal tender.
Additionally, unbanked population and high remittance volumes are among the reasons for Vietnam’s crypto adoption. Data shows the country’s diaspora sent more than $18 Billion in remittances during 2021.
Disclaimer
The views and opinions stated by the author, or any people named in this article, are for informational purposes only and do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.
Anurag is working as a fundamental writer for The Coin Republic since 2021. He likes to exercise his curious muscles and research deep into a topic. Though he covers various aspects of the crypto industry, he is quite passionate about the Web3, NFTs, Gaming, and Metaverse, and envisions them as the future of the (digital) economy. A reader & writer at heart, he calls himself an “average guitar player” and a fun footballer.
