From a financial perspective, blockchain games could be seen as a 'promised land,' but from the standpoint of Vietnam's current legal framework, these games are falling into a "grey area," exposing both businesses and players to potential legal risks at any time.
"Play to earn" will remain an experiment and will never become the mainstream trend of the gaming industry in the future (illustrative image).
Are NFT Item Transactions Forbidden or Not?
Blockchain games are a type of video game that incorporates blockchain technology. These elements often include the use of cryptocurrency or non-fungible tokens (NFTs). NFTs are usually issued as items within the video game, which can be traded for the cryptocurrency associated with the game. From there, they can be further traded for cash, with values sometimes reaching millions of USD. Currently, blockchain games with a pay-to-earn model allow players to both play and earn money by investing and trading in-game items.
However, the transaction of NFT items raises the question of whether such actions are prohibited under Vietnam's existing laws regarding virtual item exchanges. At present, virtual items are not recognized as assets in Vietnam. Article 7, Paragraphs 4 and 5 of Circular No. 24/2014/TT-BTTTT states: "Virtual items can only be used within the scope of the video game and for the purposes the company has reported. Virtual items are not assets and cannot be exchanged for money, payment cards, vouchers, or other tangible goods with transactional value outside the video game."
Vietnamese law prohibits the buying and selling of virtual items between players. In the case of violations, individuals performing such acts face administrative penalties, with fines ranging from 2,000,000 VND to 200,000,000 VND, depending on the nature of the violation. For trading virtual items, violators will be fined between 2,000,000 VND and 3,000,000 VND under Point b, Clause 3, Article 106 of Decree No. 15/2020/ND-CP.
For actions converting virtual items into money or tangible goods with transactional value outside the video game, violators will be fined between 170,000,000 VND and 200,000,000 VND under Point a, Clause 6, Article 104 of Decree No. 15/2020/ND-CP.
How Should Taxes Be Collected on NFT and Cryptocurrency Transactions?
Taxes on NFT item and cryptocurrency transactions from blockchain games may be collected in the form of income tax for both individuals and businesses. There may also be a consideration for environmental taxes, as many reports suggest that the creation and operation of systems related to NFTs and cryptocurrencies consume electricity equivalent to that of an entire country, potentially exacerbating climate change.
Axe Infinity made a splash in the international NFT gaming community by achieving resounding success.
Under current Vietnamese law, personal income tax applies to income from wages, investment income, royalties, commercial franchise income, winnings, inheritance or gifts, capital transfers, stock sales, and real estate transactions. So, where should the income from NFT and cryptocurrency transactions fall in order to establish a legal basis for tax collection? Could income from cryptocurrency and NFTs be classified as income from capital transfers? In other words, could the purchase of NFTs and cryptocurrency be seen as a form of capital investment? And this leads to the question: Are NFTs and cryptocurrencies considered assets?
Currently, it is still unclear whether NFTs and cryptocurrencies fall under the scope of assets recognized and regulated by the state.
Thus, transactions involving NFT items and cryptocurrencies are not considered asset transfers, and therefore, the profits generated by individuals in these exchanges cannot yet be taxed. Additionally, the anonymity inherent in cryptocurrency transactions may make it difficult to determine the income of individuals involved in these trades.
For businesses providing blockchain games, income derived from NFT item and cryptocurrency transactions is still considered part of their business revenue. However, the legal status of combining blockchain games with finance, along with the issuance of cryptocurrencies, likely requires further legal consideration. There is also the issue that some blockchain game companies today have market valuations in the billions of USD but pay taxes below public expectations. The market valuation of these companies is based on the exchange rate of the cryptocurrency they issue, similar to how a company's market cap on a stock exchange is determined. This amount is not the basis for corporate income tax; instead, the actual business revenue should be assessed.
Should NFTs and Cryptocurrencies Be Recognized as Legal Assets?
The issue of the "cryptocurrency asset" ecosystem. Blockchain technology is currently being applied across many sectors, including fashion, food, art, and sports, and can be utilized in any field, potentially leading to the creation of virtual universes — a concept where some local governments, such as in Shanghai, China, are planning to provide public services. This, combined with the central Chinese government's trial of the e-CNY electronic wallet for the digital yuan in several cities, may soon usher in new developments related to digital assets and virtual living in the country and globally.
It is evident that technological progress is irreversible, so, given the benefits and risks it brings, the state must take responsibility to protect its citizens' rights. Therefore, the question of whether to recognize blockchain-based products like NFTs and cryptocurrencies as legal assets becomes crucial. Furthermore, when trading NFTs and cryptocurrencies using blockchain technology via smart contracts, determining whether the contract is valid or invalid under the law becomes important.
If we move towards recognizing these cryptographic products as assets, the next question is: Which type of asset would they fall under in the Civil Code's classification of assets (tangible goods, money, negotiable instruments, or property rights)? Or should they be considered a new class of asset?
Despite the many legal questions surrounding blockchain games and blockchain technology, the government needs to provide a clear stance on the issue to protect both governmental and citizens' interests, rather than leaving the matter unresolved, which allows risks to remain unregulated and hanging over everyone's heads.
Nguyen Lan Phuong - Institute for Policy Studies and Media Development.
(This translation was provided by an automated AI translation tool)
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