Massive digital currency scam in Vietnam leads to calls for preventive measures

Friday, 2018-04-13 16:00:05
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NDO - In the last few days, a local company has been accused of appropriating hundreds of millions of dollars by trading digital currency under a Ponzi scheme, raising serious concerns about the risks associated with it.

According to media reports, Modern Tech has swindled thousands of investors by advertising certain digital currencies as trendy tech products and promising unusually high returns of up to 60% a month and commissions of up to 8% if they could invite other investors to join the network.

The company continuously announced new records in fund mobilisation and bonuses but at the same time changed the interest payment method from cash to digital currency through online transactions, using what they said was secure software in order to reduce traceability.

Trading in digital currency always contains a handful of risks, including legal, technological and market organisation.

The legal risks are associated with their origin. Calling them digital currencies is misleading since they are merely technological products and not currencies in their own right as they are not recognised as money, without such functions as a measure of value, a medium of exchange or a store of value.

They are not issued by a government so they are not legal nor protected as in the case of national and international currencies. Some countries have not banned the trading of these products because they consider the exchange of such products as a freedom, not because they are recognised as legal currencies.

In Vietnam, those who issue, supply and use illegal instruments of payment could face fines of up to VND200 million (US$8,800) under two Government decrees adopted in 2014.

Under another decree issued in 2016, digital currencies are not legal payment instruments and the issue, supply and use of digital currencies as payment instruments are banned.

These acts can even be prosecuted under the 2015 Criminal Code, which has come into force since 1 January 2018. Owners of digital currencies are also not protected or recognised by law.

Therefore, investors have to face all the risks on their own, while the functional agencies also find it hard to deal with disputes and frauds arising from the trading of digital currencies.

Technical risks in digital currencies are unavoidable and will become more serious due to rapid technological development and improved skills of hackers and cybercriminals. Risks also come from the fact that a digital currency quickly loses its value with the constant appearance of new digital currencies which are more appealing than the old ones.

Because of their illegal status, complexity and tech secrets, exchanges of digital currencies are usually designed in a hasty way, facing manipulative pressure while lacking in regulations, therefore they are highly volatile and only exist for a short time.

The risks will be multiplied and highly unpredictable when the digital currency market is organised under a Ponzi scheme.

Therefore it is an imperative for investors and regulators alike to identify the fraud risks associated with trading digital currency to ensure the stability of the financial system and prevent social disorder arising from scams.