Parallel Financial System: The Rise of Stablecoins in Vietnam

Author: Aiden, Jay Jo Source: Tiger Research Translation: Shan Ouba, Golden Finance

Abstract

• Stablecoins serve as an independent financial channel in Vietnam, widely used for trading, remittances, and value storage, bypassing traditional banking systems and government regulations.
• Vietnamese users frequently use stablecoins through unofficial channels. Although the government has explicitly prohibited this, there has yet to be any substantive policy discussions regarding stablecoins.
• Vietnam should officially integrate stablecoins into its financial system, aligning policies with market realities, which will help enhance Vietnam's competitiveness in the digital finance sector in Southeast Asia.

1. The Growth of the Stablecoin Market and Regulatory Disconnection

Vietnam has long been at the top of the global cryptocurrency adoption index. However, the lack of regulation has severely restricted the development of the industry. Nevertheless, Vietnam's crypto industry is still growing rapidly, driven mainly by retail investors, and in this process, the stablecoin market is gradually emerging. Despite the lack of official channels for deposits and withdrawals, Vietnamese users are actively trading stablecoins through various means, including using escrow transactions on Binance P2P, over-the-counter trading via Telegram, and direct peer-to-peer transfers using self-custody wallets.

This retail-centric self-growing model has significant long-term limitations. The lack of regulation reduces market transparency and stability, and relying solely on retail investors cannot support the sustainable development of the market. At the same time, Vietnam has not established a legal and institutional framework related to stablecoins, nor has it engaged in substantial policy discussions. This "disalignment between the market and regulation" not only exacerbates potential risks in the financial market but also causes Vietnam to miss strategic opportunities to enhance national competitiveness.

This report analyzes how Vietnamese users use stablecoins in actual financial activities, including trading, peer-to-peer remittances, and payments. It also points out the potential risks arising from regulatory gaps and discusses the necessity and strategic significance of establishing stablecoin policies based on users' actual behaviors.

2. Stablecoins Have Integrated into Vietnamese User Behavior

2.1 Trading and Liquidity Management

Vietnamese crypto investors have long surpassed the simple exchange of fiat currency and cryptocurrency with their use of stablecoins. Investors choose to hold their funds in stablecoins (primarily USDT) after trading, rather than immediately exchanging back to Vietnamese Dong (VND), and consider it as reserve funds for future transactions or as a "digital safe-haven asset" against market volatility. This indicates that Vietnamese investors have begun to actively manage liquidity through stablecoins, representing a significant change in behavior compared to the past.

When the cryptocurrency market declines, Vietnamese investors tend to convert their funds into USDT rather than fiat. Especially during periods of significant market volatility, the price of USDT on Binance P2P has risen to 25,000-27,000 VND, which is a premium of 5% over the normal exchange rate, reflecting that investors view stablecoins as a store of value independent of other crypto assets. This premium indicates that stablecoins have become an indispensable liquidity management tool in the Vietnamese crypto market.

This phenomenon is not a short-term anomaly, but a long-term trend. Between 2020 and 2025 (excluding special events such as the FTX and Terra-Luna crashes), USDT has maintained a positive premium relative to the US dollar in Vietnam, with an average premium of 3.35% in 2024. Investors are willing to bear additional costs to actively respond to market fluctuations and exchange rate risks using stablecoins.

The reason behind this behavior lies in the complex procedures and strict regulations of the Vietnamese financial system. Banks have strict scrutiny over the sources and uses of funds, and investors face many inconveniences and costs when withdrawing or transferring money. To circumvent these regulatory obstacles and risks, investors have gradually established an independent fund management system centered around stablecoins within the crypto ecosystem. This also explains why stablecoins have become indispensable in the investment portfolios of Vietnamese investors.

2.2 Peer-to-Peer Transfers: Stablecoins as Payment Infrastructure

Stablecoins have become an important tool for peer-to-peer payments and remittances in Vietnam. Although Vietnamese law prohibits the use of cryptocurrencies as a means of payment, users still conduct transactions through personal wallets and unofficial OTC channels. Vietnam is one of the countries with the highest volume of remittances received in stablecoins globally, with approximately 7.8% of international remittances coming in the form of stablecoins like USDT.

Compared to traditional international remittance methods (such as SWIFT and Western Union), which charge fees of 5-7% and have longer processing times, stablecoin transfers can be completed within minutes and incur no intermediary fees. This makes stablecoins an efficient remittance option for overseas workers and freelancers. E-commerce sellers, purchasing agents, and freelancers also commonly use USDT for payments through Telegram or social media platforms.

This stablecoin-based peer-to-peer payment system reproduces the cash-based informal economic system that Vietnam has long relied on in the digital space. This payment method is highly adaptable online and has rapidly expanded into a medium for cross-border transactions.

2.3. Stablecoins as a Means of Value Storage

**In times of high inflation or exchange rate fluctuations, Vietnamese citizens have traditionally preferred safe-haven assets such as physical gold or the US dollar. **Gold preference is particularly prominent. Vietnamese households buy around 50-60 tonnes of gold per year, which is expected to increase to 70-80 tonnes over the next five years. In mid-2024, Vietnamese banks sold more than 2 tonnes of gold in just one week, despite high gold prices. This suggests that ordinary households with limited access to financial services are actively using gold as a long-term store of value rather than short-term speculation.

In recent years, stablecoins have emerged as a new digital safe-haven asset, supplementing or replacing traditional assets like gold or the US dollar. Stablecoins like USDT or USDC act as digital dollars, providing a stable value preservation function similar to gold or physical US dollars. In Vietnam, using cryptocurrency as a payment tool is still illegal. Nevertheless, an increasing number of users hold stablecoins purely to maintain stable asset value, rather than for trading or payment. This clearly indicates that stablecoins serve as a store of value in Vietnam.

3. The Path Forward for the Vietnamese Government: Formulating Regulatory Policies that Reflect Market Realities

In Vietnam, stablecoins have naturally developed and grown outside the official financial system, becoming an important pillar of "shadow finance." Investors widely use stablecoins not only as a primary liquidity management tool but also as a means for peer-to-peer payments and value storage.

The Vietnamese government has recently begun to pay attention to the cryptocurrency industry and is preparing relevant legal frameworks and regulatory sandboxes. However, there is still a lack of specific and in-depth discussions regarding stablecoins that are actually widely used in the market. As Prime Minister Pham Minh Chinh stated, "What is not prohibited by law should be allowed for people and businesses to do; the state should not interfere in areas where the market can do better." This indicates that, rather than strict control, Vietnam is more suited to adopt a market-friendly regulatory strategy that encourages innovation. Formulating policies that reflect users' actual behaviors and safely incorporating them into the formal financial system will be more conducive to achieving a balance between innovation and regulation.

3.1. Learn from the experiences of neighboring Southeast Asian countries

As Vietnam struggles to establish clear regulatory policies for stablecoins, neighboring Southeast Asian countries have developed regulatory frameworks that reflect market realities. Unlike Vietnam's bureaucratic model of "regulating what is not understood and banning what cannot be regulated," neighboring countries have formulated practical policies that suit their own national conditions:

• Singapore adopts a systematic institutional design. The stablecoin regulatory framework launched in 2023 was developed by the Monetary Authority of Singapore (MAS), which clearly stipulates the 1:1 reserve requirement, daily market value disclosure obligations, and equivalent redemption mechanisms. Only authorized entities are allowed to issue stablecoins, enhancing the credibility of Singapore's digital asset market.
• Thailand implements a flexible "dual-track" policy. In March 2025, regulators approved the use of USDT and USDC on authorized exchanges, while also promoting a pilot for a stablecoin anchored to the Thai Baht and backed by government bonds. This model acknowledges the practicality of foreign stablecoins while gradually developing a digital alternative for the national currency.
• Philippines emphasizes pilot projects and pragmatism. The central bank (BSP) and the Securities and Exchange Commission (SEC) have launched a pilot project for stablecoins aimed at remittances (such as PHPC), prioritizing practical application trials based on a regulatory sandbox in the cross-border payment sector, rather than legislating first and then practicing.

In contrast, Vietnam has yet to establish a dedicated regulatory framework for stablecoins, resulting in an increasing gap between market practices and policies.

The experiences of these countries indicate that regulation must be based on the actual behaviors of local market users, rather than blindly copying models from other countries. If Vietnam fails to formulate policies that reflect the genuine demands of the market, informal financial channels will further solidify in the gray area, leading to long-term risks for future financial regulation and monetary policy operations.

3.2. Construction of Stablecoin Strategy Based on the Realities of the Vietnamese Market

Currently, retail users in Vietnam have incorporated stablecoins (especially USDT pegged to the US dollar) into their daily financial activities. Therefore, policymakers should face this market reality and formulate policies through active communication with market participants, rather than adopting unilateral and strict controls.

For example, compared to the officially led and limited practical use of central bank digital currencies (CBDC), Vietnam can design a bottom-up regulatory model based on existing user behavior to formulate policies that are more aligned with reality. This approach can both enhance regulatory efficiency and be more operationally feasible.

Specific measures that the Vietnamese government may consider include:

• Enhance the transparency of informal channels by certifying over-the-counter trading brokers, introducing appropriate KYC systems, and implementing a systematic peer-to-peer trading platform.
• Launch a regulatory sandbox for a stablecoin pegged to the Vietnamese Dong (VND) and apply it to specific areas such as e-commerce, foreign exchange remittance, and the freelance market.
• Provide compliant, user-friendly local alternatives that compete favorably with US dollar stablecoins.

This strategy will help maintain the stability of the financial system while promoting the natural development of the market. If Vietnam can actively respond to changes in the digital financial environment, it will be capable of building a more transparent and secure stablecoin ecosystem.

4. Summary

Vietnam's stablecoin ecosystem is not driven by government policies, but rather formed naturally by users to meet actual needs. In an environment lacking official trading channels, users have created their own stablecoin financial pathways: they trade USDT, remit through OTC channels on Telegram, and use digital dollars as a store of value. These practices reflect the market's efforts to fill the gaps in the traditional financial system.

Initially, users only viewed stablecoins as a temporary workaround in the system. Today, they have become an important foundation of Vietnam's digital financial ecosystem. Even without legal confirmation or clear regulation, users have widely adopted stablecoins in their daily lives. However, if this behavior continues to operate in a legal vacuum, it may push them into an informal and opaque gray area, further exacerbating distortions and instability in the financial market.

Singapore and countries like Thailand have actively embraced market-driven user behavior, establishing a regulatory environment that balances innovation and stability. Vietnam also needs to develop a regulatory framework based on market realities, formally recognizing the informal financial networks built by users, and strengthening its financial infrastructure through stablecoins pegged to the Vietnamese Dong.

Through this "user-centered" regulatory approach, Vietnam can enhance the transparency and stability of its financial markets, and is also expected to take a leading position in the governance of digital assets in Southeast Asia.