SOME LEGAL ISSUES IN TRADING DEBTS IN VIETNAM

Set out below are some legal issues in transfer of debts (Debts) from a credit institution (Originator) to a company licensed to trade debts in Vietnam (Debt Trading Co). Debt trading between a credit institution and a credit institution is useful for the credit institution to handle its bad debts or to issue assets-backed securities:

Credit institutions are allowed to negotiate loan interest rates based on market demand and supply and the creditworthiness without being restricted to maximum interest rate except in some cases. Meanwhile, interest rates of loans extended by non-credit institutions are subject to the maximum interest rate of 20% per annum under the Civil Code 2015. In practice, interest rates of consumer loans are quite high and could be higher than the maximum rate of 20% per annum. If the interest rate of the Debts is higher than 20% per annum, it is not clear at law whether the Debt Trading Co, upon owning the Debt, can continuously charge such interest rate;

Regulations on digital wallets in Vietnam

Digital wallets are an important tool for the development of e-commerce and fintech industries. The State Bank of Vietnam (SBV) has issued certain regulations on digitial wallets. However, these regulations seem to be inadequate.

Under Decree 101/2012, a digital wallet is regarded as a payment intermediary service (dịch vụ trung gian thanh toán) whereby the wallet user is issued a digital account associated with an electronic media (e.g., a mobile phone) and containing a monetary value. The monetary value in a digital wallet is secured by monies transferred from the user’s bank account to the wallet service provider’s account. User can only inject and withdraw cash from a digital wallet through the user’s account. Monies in the wallet service provider’s account can only be used to pay for goods or service providers or to return to the wallet user. The Law on Anti-money Laundering 2012 requires a digital wallet service provider as a financial institution with new technology to meet face-to-face with its clients when the clients first make a transaction with the service provider.

In light of the above regulations,

An user without a bank account cannot have a digital wallet in Vietnam. This could hinder the growth of digital wallet.
Direct money transfers between two digital wallets are not permitted. In practice, the SBV is allowing certain digital wallets to conduct direct monies transfer on a pilot basis.
An user cannot withdraw cash or inject cash directly to his/her digital wallet. This must be done via a bank account.
Monies in a digital wallet may not be used as security for lending.
A digital wallet provider is required to meet face to face with its customer whenever a wallet is issued.

5 September 2018 - Update to reflect the requirements under Anti-money laundering regulations.

Info

Comment

Vietnamese regulator’s imposing prohibition on cryptocurrency activities

Under a recent announcement in Official Letter No. 4486/UBCK-GSDC dated 20 July 2018, the State Securities Commission of Vietnam (SSC) requires public companies, securities companies, asset management companies, and securities investment funds (quỹ đầu tư chứng khoán) (i) not to conduct any illegal offering, transaction or transaction brokerage relating to virtual money (tiền ảo) which should include cryptocurrencies like Bitcoin and to (ii) adhere to the legal regulations on anti-money laundering.

The above official letter was based on Directive 10/CT-TTg of the Prime Minister dated 11 April 2018. Both of them once again confirm the view of Vietnamese government on virtual money that was stated by the State Bank of Vietnam in its press release dated 27 February 2014 about Bitcoin in Vietnam:

(a) virtual money is not currency; and

(b) virtual money is not a legal tender.

Transfer of loan commitments between banks in Vietnam

Vietnamese banking regulations do not have clear mechanics for transfer of loan commitments between banks or credit institutions in Vietnam. In particular:

Under Circular 9/2015 of the State Bank of Vietnam (SBV) on loan transfer, loan transfer is defined to mean the transfer of “the right to collect loan” arising from the lending operation by a bank (the Original Bank) to a loan purchaser, which may or may not be a bank. The definition of loan under Circular 9/2015 does not include loan commitment where a bank only commits to lend to a borrower but has not actually disbursed the loan. Accordingly, all the loan transfer mechanics under Circular 9/2015 do not directly apply to transfer of loan commitment.
One way for banks to overcome the lack of regulations on transfer of loan commitment is for the Original Bank to actually disburse the loan and then transfer such loan to another bank (New Bank) in accordance with Circular 9/2015. However, under Circular 9/2015, if the loan purchaser is a bank, then the SBV requires the New Bank to have a loan purchase license. Not all banks in Vietnam are granted a loan trading licence by the SBV.
Under the lending regulations (Circular 39/2016), a loan commitment could be understood to be an undertaking by a bank to handover to the client an amount of money to use. Therefore, it appears that a loan commitment is regarded as an obligation to lend by a bank (which, of course, is usually conditional on the borrower’s satisfying certain conditions precedent). Therefore, transfer of a loan commitment is regarded as a transfer of obligation and will require the consent of the borrower. Borrower’s consent is usually not a problem since any proper loan agreement will include a transfer clause which allows the bank to transfer any of its rights and obligations under the loan agreement to a third party.

Vietnam Business Law