Amid crypto market crash, what Vietnam has to offer for blockchain enthusiasts?
What makes global investors keep flocking into Vietnam with their big-pocket blockchain-focused VC funds in recent years?
While the technology underpinning the global crypto euphoria is facing increased negative sentiments after Axie’s $625-million hack and Terra’s LUNA crash, Vietnam, the world’s top-ranking country in crypto adoption, has the potential to boost blockchain developments in some other directions.
What makes global investors keep flocking into Vietnam with their big-pocket blockchain-focused VC funds in recent years? Capital flows in non-fungible tokens (NFTs) in Vietnam also surged from $37 million to $4.8 billion in 2021, according to Finder. Some of the reasons must be attributed to the fact that around 5.9 million people, or 6.1 percent of Vietnam’s total population, are having a touch with blockchain-powered assets - cryptocurrencies and NFTs. This figure is even forecasted to rise 30 times by 2030 and make the market profitable soon.
Vietnam, alongside India, Pakistan, and Ukraine, was ranked among the top countries globally with the greatest crypto adoption by retail investors in 2021, according to crypto-analysis firm Chainalysis.
“Over the past two years, we have witnessed a very strong emergence of blockchain-powered metaverse projects in entertainment, play-to-earn, ‘whatever’-to-earn, as well as blockchain-dedicated funds and communities in Vietnam,” said Anh Nguyen, program manager at Swiss EP Vietnam. “We start to see a growing blockchain ecosystem in the country.”
Leveraging the shared, immutable ledger concept, blockchain has the ability to track and secure anonymous borderless exchanges of assets and information, enabling its applications in a variety of industries that are not limited to finance.
A flourishing metaverse land
Since gaming has always paved the way for the adoption of various revolutionary technologies in life, from Farmville with social media, to Pokémon Go with Augmented Reality (AR), or simple digital card games that get us accustomed to personal computers, people have reasons to expect that gaming can serve as the gateway to the next revolution of blockchain.
Gamers around the world are setting their first footsteps into the metaverse, a persistent and connected virtual environment powered by blockchain technology, through troves of NFT-based games. Within these in-game environments, people are not only immersed in the gameplay as a recreational activity, but they can also socialize with other people, create their own assets, trade, and earn real-life money. This earliest version of the metaverse also gives rise to communities of creators and workers inside a burgeoning digital economy.
Vietnam entrepreneurs were quick to jump on the bandwagon, or even better, spearhead the phenomenon worldwide with its successful play-to-earn video game Axie Infinity.
Prior to the recent notorious $600 million crypto heist, Sky Mavis, the Vietnamese creator of Axie Infinity, banked $152 million in its Series B round and joined the unicorn club at a valuation of around $3 billion within only two years of inception. At its peak, Axie’s governance token, AXS, even had a fully diluted market capitalization of about $16.7 billion. The studio has quickly transcended national borders and become an international champion, inspiring the next wave of NFT-based gaming startups locally and globally.
There are at least 1,000 blockchain-based game projects developed in the country, according to the blockchain gaming community Yield Guide Games, with around 10 of them having market capitalizations of over $100 million. Sipher, Anxient8, Faraland, and HeroVerse are some of those projects catching on and have raised big money.
“Blockchain in the gaming space has become a really nice fundraising tool,” Robert Vong, COO of Vietnam- and Singapore-based crypto liquidity startup Kyber Network, said at Swiss EP’s partner summit in March. “There are also new types of economic models that have been pioneered like play-to-earn. This is a perfect fit for blockchain at the moment.”
Abundant as they are, the average lifespan of blockchain projects is only a little more than one year, plaguing the sector with numerous scams and fraud scandals. However, experts are sharing a consensus that this is only a short-term development for any fast-paced and nascent technologies, similar to the dot-com bubble in the 2000s.
“Every country has scamming problems [with regards to new technologies],” Cris D. Tran, co-founder of FAM Central and managing director of Vietnam Startup Investment Fund, said at an event co-hosted by Swiss EP and Zone Startups Vietnam. “But from my point of view, Vietnam does have the luxury to balance it out with a number of good projects we are putting on the map.”
Apart from other early applications in gaming, agriculture, logistics, and real estate, Tran stated that many large enterprises in Vietnam's retail industry are showing interest in blockchain and metaverse to offer a brand-new approach to interacting with their users.
A blockchain talent pool within regulatory “grey areas”
Vietnam, besides India, China, Malaysia, and Indonesia, has long been known as a top IT outsourcing hub for global companies. As of 2019, Vietnam is home to around 430,000 IT developers, whose skills were ranked in the top 06 worldwide, as cited by TopDev in the 2020 report.
In Vietnam, some leading universities have even doubled down on fostering new sources of high-quality blockchain developers. FPT Chairman Truong Gia Binh declared in April that all FPT university’s students are required to learn blockchain and metaverse. RMIT unit in Vietnam also set up a Fintech-crypto center in collaboration with Binance and Infinity Blockchain Ventures. However, much work is still needed to be done as Vietnam is estimated to be short of 100,000-200,000 IT staff each year, let alone blockchain-savvy developers.
Young and willing-to-learn Vietnamese blockchain geeks are also more and more hunted by both local and foreign employers for new projects, giving other technology startups a run for their money amid a talent crunch.
Blockchain talent is not the only resource that is being lured away from the local market. Most companies in this sector also decide to incorporate their businesses in Singapore, Hongkong, or Malaysia even when their teams are based in Vietnam.
“It doesn’t make sense for the country to keep watching the sector like this because the longer we wait for the regulation, the more projects’ crypto revenue outflow and inflow are gonna be outside of Vietnam because they could not put any funds in the local market,” stated Cris D. Tran.
This is not only because of difficulties in foreign investment procedures, Vietnamese legislation has also not recognized or legalized cryptocurrency as a means of transaction. Thus, any issuance, supply, or use of them as currency or means of payment is banned and subject to administrative or even criminal sanctions. However, for the time being, there are no rules forbidding nor permitting the possession, trading, or investing in cryptocurrencies, putting the sector’s development in a gray area.
To solve current challenges, in May 2020, Prime Minister Pham Minh Chinh asked the central bank to work on a pilot project on cryptocurrency as part of the government’s plan toward a digital economy. He also ordered the Ministry of Finance to develop a legal framework for cryptocurrency and virtual assets, leading to the formation of a research group on this topic on March 30, 2021 by the finance ministry.
More efforts have been placed on the development of blockchain technology instead of the virtual currency per se. On May 17 this year, Vietnam’s Ministry of Home Affairs launched the Vietnam Blockchain Union, the first official legal entity specializing in the field of blockchain technology in an attempt to promote its application in the nation's digital economy.
Even amid a crypto market downturn, Swiss EP’s PO Saigon Innovation Hub, or SIHUB, an innovation arm under the Ho Chi Minh City Department of Science and Technology, co-hosted "Blockchain Global Day 2022: Into The Infinity Con-verse" in July, exhibiting more than 30 blockchain-based projects, including a “sing-to-earn” game, “play-to-earn” football game, NFT marketplace, blockchain-driven real estate platform, metaverse tools, besides other applications in agriculture, fintech and education.
“With blockchain, Vietnam has advantages and is in good place to catch up with the world or even be ahead of the pack,” SIHUB CEO Huynh Kim Tuoc said. “Next, we will build the "Blockchain City" program, where knowledge, investment funds, educational activities, projects, and events converge together to promote Ho Chi Minh City as a blockchain hub with a commitment to a ‘sustainable blockchain future'.”
This partly shows that Vietnam probably does not want to hinder its undeniable potential to develop blockchain and its applications in the country. However, whether or not it is ready for exponential growth in every direction is still put to test.
“I think they [Vietnamese policymakers] are looking at what America is doing, what China is doing, and what all the other countries are doing, and then trying to align with everyone,” said Robert Vong of Kyber Network. “This might take some time because it's still evolving really quickly. Technology and market are moving faster than regulations, which is usually how it is.”