The fallout from an alleged pyramid scheme in Vietnam that used digital money transfers has seen bitcoin come under the crosshairs of governmental authorities who have – once again – warned everyday Vietnamese citizens against using the cryptocurrency.
This, despite the perpetrators running the website linked to the alleged pyramid scheme, not having actually used bitcoin in their illegal enterprise that is said to have netted over $100,000, according to a report on Bloomberg BNA.
Regional publication Giadinh reveals the means through which a pyramid scheme works by exploiting the interest and fervor surrounding digital currencies.
Roughly translated, one economist explains:
Real money is used to buy virtual currency and as virtual currencies gain value, commissions and bonuses are received by users who call in other investors to participate.
At this point, it becomes a typical pyramid scheme, with money taken from new investors as commissions and dividends for earlier investors.
Still, the result of the pyramid scheme on Gold889.com (now offline) has resulted in an official warning by the country’s Ministry of Public Security’s technology crime prevention office. Nguyen Thi Thu Hang, the chief of the operation pointed to an increasing number of online schemes that are interlinked with bitcoin transactions. These schemes, while exploiting the legitimacy of the cryptocurrency, promised annual returns of as high as 80%.
As reported by BNA, Hang stated the following in an October interview with the state broadcaster:
What these platforms have in common is they receive money through bitcoin, operate under a multi-level model, and take money from a later person to pay an earlier person.
An Endemic Concern
The supposed promise of quick and multiplying returns coupled with the lack of understanding with how digital currencies work has resulted in MLM schemes repeatedly luring investors in Vietnam in recent times.
The official’s comments come not long after another Vietnamese investment scheme that also used multi-level-marketing (MLM) and bitcoin went bust after promising investors returns of up to 144% a month. The scheme saw a total of 22 billion dong (approx. $1.1 million USD) deposited, with hundreds of participating investors inevitably turning victims.
In March 2016, the Department of e-Commerce and Information Technology in the country issued an alert, warning against storing or trading in virtual currencies like bitcoin. The warning made light of aggressive regulatory measures taken against bitcoin by the likes of Russia and Thailand in the past. It also referenced to the now-defunct Japanese bitcoin exchange Mt. Gox, pointing to monetary losses suffered by investors in Japan.
Furthermore, the State Bank of Vietnam – the country’s central bank – released a statement denouncing bitcoin as a legal currency in 2014. An excerpt of the statement read:
The possession, sale and use of “virtual money” as an underlying asset class is very risky for the people and are not protected by law. [The] State Bank recommends that organizations and individuals should not invest, hold or carry out transactions involving Bitcoin or other similar virtual currencies.
Pyramid schemes have been around for decades and continue to exist by operating with traditional fiat currencies, more-so than bitcoin. Evidently, however, pinning the blame on bitcoin and digital currencies come easier for authorities.
While bitcoin remains unregulated in Vietnam, there have been efforts to spread awareness of the cryptocurrency in the country. For instance, VBTC, Vietnam’s first BTC exchange, launched a remittance service toward the end of 2015 which enabled one-hour international money transfers into Vietnam with BTC. Facilitated by the exchange, the bitcoin transfer can then be withdrawn in local fiat currency across 9,200 locations in the country.
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Last modified: March 4, 2021 4:52 PM