Current legal issues related to currency

In the context of the global economy constantly fluctuating and transforming towards digitalization, currency with the role as an intermediary instrument in exchange and circulation of value is also undergoing many profound changes. The emergence of digital currencies, together with the expansion of cross-border transactions, has posed a series of new legal challenges. In this article, NPLaw will analyze the notable and remarkable legal issues related to currency in the present period.

I. Current situation of law related to currency

At present, the legal system related to currency in Vietnam and many countries around the world is facing great challenges in regulating modern financial activities, especially the rapid development of digital currencies, e-wallets, cross-border transactions and non-cash payment forms. While traditional legal regulations mainly regulate fiat money and banking transactions, digital assets such as Bitcoin, Ethereum and stablecoins have not yet had a clear legal framework.

In Vietnam, the State Bank is the only authority entitled to issue money. Forms of cryptocurrency have not yet been recognized as legal means of payment. In addition, activities related to foreign currencies, international money transfers, or cross-border financial transactions still need to be strictly supervised in order to prevent acts of money laundering, terrorist financing and tax evasion.

II. What is law related to currency?

1. Importance of law related to currency

Law related to currency is the system of legal regulations governing relations arising in the field of finance – currency, including: issuance, circulation, use, conversion and management of currencies in the economy. These regulations are built to ensure the stability of the financial system, protect the rights and interests of individuals and organizations, and maintain the order of national financial – banking safety.

Importance of law related to currency:

• Ensuring national financial – monetary security: Law plays a pivotal role in controlling inflation, regulating currency circulation and protecting the banking system.
• Creating trust for the market and people: When the legal framework is clear, people and enterprises are assured to participate in financial and investment activities.
• Preventing acts of violating the law: Such as money laundering, terrorist financing, manipulation of currency market, financial fraud via the internet.
• Adapting to technological development: The emergence of fintech, cryptocurrency, AI in finance requires law to be continuously updated and adapted.

2. What types of monetary transactions are recognized and protected by law?

Pursuant to Clause 6 Article 2 of Circular 02/2021/TT-NHNN, the types of monetary transactions include:

• Spot foreign exchange transaction (spot transaction): is a transaction in which the two parties commit to buy and sell an amount of one currency with another currency at the exchange rate determined at the time of the transaction, and the settlement date is a maximum of 02 (two) working days from the transaction date.
• Forward foreign exchange transaction (forward transaction): is a transaction in which the two parties commit to buy and sell an amount of one currency with another currency at the exchange rate determined at the time of the transaction, and the settlement date is a minimum of 03 (three) working days from the transaction date.
• Foreign exchange swap transaction (swap transaction): is a transaction between two parties, including one purchase transaction and one sale transaction of the same amount of one currency with another currency, with the exchange rates of the two transactions determined at the time of the transaction, and the settlement dates of the two transactions being different. A swap transaction includes two spot transactions or two forward transactions or one spot transaction and one forward transaction.
• Foreign currency option transactions (option transaction): is a transaction between two parties, in which the buyer pays the seller an option premium in order to have the right, but not the obligation, to buy or sell an amount of one foreign currency with another foreign currency within a period of time agreed upon by the two parties, at the strike rate determined at the time of the transaction, and to be settled on a future date. If the buyer chooses to exercise the right, the seller must perform the obligation as committed.

III. Legal provisions related to law concerning currency

1. Where are the legal provisions concerning currency in Vietnam stipulated?

In Vietnam, the legal provisions concerning currency are governed by various legal instruments, mainly including:

• Law on the State Bank of Vietnam 2010: Clearly stipulates the role, functions, and authority of the State Bank in monetary management, issuance of currency, and stabilization of the value of the Vietnamese Dong.
• Law on Credit Institutions 2024: Governs the operation of banks, financial institutions, and payment services.
• Law on Anti-Money Laundering 2022: Regulates large-value transactions, cross-border money transfers, and prevents money laundering activities through the financial system.
• Ordinance on Foreign Exchange 2005, as amended and supplemented in 2013: Regulates foreign exchange activities in the Socialist Republic of Vietnam.
• Civil Code 2015: Stipulates the performance of payment obligations in civil, commercial, and contractual relations.
• Decrees and Circulars of the State Bank of Vietnam: Specify legal provisions on the use of cash, foreign currency, non-cash payment, management of e-wallets, cryptocurrencies, such as Decree 52/2024/ND-CP on non-cash payment; Circular 15/2024/TT-NHNN on provision of non-cash payment services issued by the Governor of the State Bank of Vietnam; etc.

2. Is it necessary to comply with any regulations when conducting international monetary transactions?

When conducting international monetary transactions, organizations and individuals in Vietnam must comply with strict regulations to ensure monetary security and compliance with international law. Some important regulations include:

• Law on Foreign Exchange (Ordinance on Foreign Exchange 2005, amended 2013): Stipulates the purchase, sale, conversion, and transfer of money into and out of Vietnam in foreign currency.
• Circular 20/2022/TT-NHNN: Guides one-way money transfer activities from Vietnam abroad and payment, money transfer for other current transactions of resident organizations and individuals.
• Circular 02/2021/TT-NHNN: Provides guidance on foreign exchange transactions on the foreign currency market conducted by credit institutions licensed to engage in foreign exchange activities, issued by the Governor of the State Bank of Vietnam.

3. How is the monetary value in commercial contracts determined under Vietnamese law?

According to the Civil Code 2015 and relevant guiding instruments, the determination of monetary value in commercial contracts must comply with the following principles:

• Payment currency is the Vietnamese Dong (VND): Pursuant to Article 23 of the Ordinance on Foreign Exchange, contracts in Vietnam are required to use VND as the unit of payment, except in certain special cases permitted to use foreign currency (such as in international trade, import-export).
• If the contract is denominated in foreign currency, it must be converted into VND: The conversion rate is usually based on the exchange rate announced by the State Bank of Vietnam or commercial banks at the time of payment.
• Value must be clear and transparent: Including payment method, payment time, and specific payment currency.
• In case of significant exchange rate fluctuation: If the contract contains a clause on adjustment of value according to exchange rate, the parties may renegotiate to protect interests; if not, the value shall be implemented as committed.

IV. Clarifications on legal issues related to currency

1. What is the licensing procedure for transactions related to currency?

The licensing for transactions related to currency, especially those with foreign elements or specialized financial activities is carried out by the State Bank of Vietnam or competent authorities. Cases requiring licensing usually include:

• Foreign exchange business, bullion trading, remittance services.
• Overseas investment in foreign currency.
• Outbound money transfer exceeding prescribed limits.
• Opening payment accounts at foreign banks.

Basic procedure:

• Submission of application dossier (including application for license, business plan, legal documents).
• The competent authority examines within a period from 15 – 30 days depending on the type of license.
• Issuance of license or refusal with written reasons.

In addition, certain common domestic monetary transactions such as transfer, bank payment, e-wallet payment, etc., do not require licensing but must still comply with relevant legal conditions.

2. If an individual or enterprise violates legal provisions related to currency, how will they be handled?

Depending on the nature, extent, and consequences of the violation, individuals or enterprises may be subject to the following forms of handling:

• Administrative sanctions: Applied in accordance with Decree No. 88/2019/NĐ-CP and its amending decrees. Example: Conducting transactions or quoting prices in foreign currency without authorization: Fine ranging from 10 – 100 million VND; Trading cryptocurrencies such as Bitcoin as a means of payment: May be subject to a fine of up to 150 million VND. Confiscation of violating objects and means: In cases of use of counterfeit money, foreign currency of unclear origin, etc.
• Criminal liability: Under the Penal Code 2015 (amended 2017), acts such as money laundering, counterfeiting money, terrorist financing, market manipulation may be subject to criminal prosecution with imprisonment ranging from several years to life depending on the crime.

3. Do employees have the right to receive salary in foreign currency, and what is the law relating to this?

According to the Ordinance on Foreign Exchange (Articles 22 and 23): All transactions, payments, price listings, advertising of prices within the territory of Vietnam must use Vietnamese Dong (VND). Therefore:

• Employees in Vietnam must be paid a salary in VND, even when working for wholly foreign-owned enterprises.
• Only certain special cases are permitted to be paid salary in foreign currency, such as: Foreign employees working at FDI enterprises, as stipulated in the labor contract; Salary payment for employees working abroad.

However, this must also be conducted through banks and strictly comply with foreign exchange procedures under the regulations of the State Bank of Vietnam.

4. If a dispute arises from a monetary transaction, what is the dispute resolution process?

When a dispute arises in relation to a monetary transaction (for example: loan contracts, delayed payments, exchange rate disputes, etc.), the parties may resolve it through the following steps:

• Negotiation and conciliation: This is the first step encouraged.
• Settlement at commercial arbitration: If the contract contains an arbitration clause (for example: Vietnam International Arbitration Centre – VIAC).
• Filing a lawsuit at Court: If there is no arbitration clause or conciliation fails. The legal basis is the Civil Procedure Code and the Civil Code 2015.
• Intervention by regulatory authorities (if there is a violation of law): In cases of foreign exchange violations, money laundering, or illegal use of money, inspection may be carried out by the State Bank of Vietnam, the Economic Police, or the Ministry of Industry and Trade.

5. What forms of currency are prohibited for use in transactions in Vietnam?

Vietnamese law strictly prohibits the following forms of currency in payment transactions:

• Cryptocurrencies (such as Bitcoin, Ethereum, etc.): Not recognized as legal means of payment (pursuant to Clause 10, Article 3 of Decree 52/2024/NĐ-CP).
• Counterfeit money or money of unclear origin: Whether VNĐ or foreign currency, counterfeit money shall be subject to criminal handling.
• Unauthorized use of foreign currency in domestic transactions: The use of USD, EUR, etc. in contracts or payment of goods and services within Vietnam is prohibited unless authorized.
• Currencies issued illegally by organizations or individuals: Including unregulated virtual reward points, internal tokens not registered with competent state authorities.

V. Should a lawyer be consulted regarding legal issues related to monetary matters? How should one contact?

When encountering legal issues related to monetary matters (such as contractual disputes, international transactions, handling of violations, or investment in foreign currency), it is advisable to consult a lawyer for accurate legal advice, to avoid risks, and to safeguard lawful rights and interests

If you have further needs for legal advice on monetary matters, please contact NPLaw, so that our team can provide direct consultation and guidance for resolution.