Revisiting the Vietnamese Web3 Market
The state of the Vietnamese Web3 market after the special report
TL;DR
Vietnam's Web3 market has seen significant growth thanks to its young population, IT developer ecosystem, and reasonable development costs. There have been notable developments in the blockchain gaming sector, but regulatory uncertainty and lack of deep development skills still remain as major challenges.
The early stages of regulatory change can be seen with a number of seminars recently organized by government agencies and the development of major local projects. Furthermore, with major global blockchain projects such as Near Protocol eyeing the Vietnamese market, it is likely to see accelerated growth in the coming years.
The education of blockchain developers continues to be centered around major universities, further strengthening Vietnam's developer pool. If the strengths are further built upon and the weaknesses of regulatory ambiguity are addressed, local projects in Vietnam may be able to bring about substantial change in the market.
It's been nearly six months since Tiger Research's “[Special Report] APAC Web 3 Powerhouse: Inside Vietnam's Blockchain Market" was published in July. However, the Web3 market is an ever-changing space, so it's important to revisit the Vietnamese market with updated information. Through key news and interviews with Tiger Research's partners, we'll take a closer look at what has changed over the past six months and what these changes mean for the future.
Vietnam's growing Web3 market
Among the Asian countries, Vietnam has shown outstanding achievements regarding the development of the Web3 industry. This development is based on three main factors: 1) a young population, 2) a vast ecosystem of IT developers, and 3) reasonable development costs. With the convergence of these factors, Vietnam has been able to achieve remarkable growth, especially in the field of blockchain games (P2E) such as Axie Infinity, despite an uncertain regulatory environment.
However, the Vietnamese Web3 market faces several challenges. The most prominent is the regulatory uncertainty regarding cryptocurrencies, which significantly impacts its business environment. In addition, the absence of deep development skills and lack of retail liquidity are major obstacles facing Vietnam in the global Web3 competition. These challenges are important considerations for Vietnam to establish itself as a global leader in the Web3 industry.
Nevertheless, Vietnam has the potential for continued growth in the Web3 industry based on 1) the dynamism of its young demographic and 2) its strength in the rapidly developing IT sector. This potential continues to grow to this day, with the following key developments since our last report.
A booming market, a changing Vietnam
Economically, the Vietnamese market is showing signs of recovery despite some challenges. Economic growth suffered this year compared to 2022 (8.2%). Nevertheless, the medium- to long-term outlook remains optimistic. In particular, the recovery of the tourism sector, growth in exports, balanced diplomacy with the United States, and positive signs from the domestic market are supporting the recovery of the Vietnamese economy.
In addition, the cryptocurrency market has also recently seen a recovery. In particular, the price recovery of Bitcoin has been significant, at one point exceeding the 38,000 USD mark. This has led to a positive impact on the development of the Web3 industry, and the Vietnamese market has also seen important developments such as changes in blockchain regulations and mergers of major companies.
1) The beginning of blockchain-related regulatory change
In September, the Vietnam Bankers Association and the Vietnam Blockchain Association co-hosted a meeting in Hanoi focused on strengthening legal regulations to prevent money laundering in cryptocurrency transactions. Nguyễn Quốc Hùng, Vice Chairman and General Secretary of the Vietnam Bankers Association, emphasized the importance of the Anti-Money Laundering Law and related guidelines which came into effect in March 2023. He pointed out how the incomplete state of the legal framework and the lack of specialized personnel in the digital and cryptocurrency sector have confused banks and state management agencies in handling cases involving new asset types. The in-depth discussion on anti-money laundering, which is the start of many blockchain-related regulations to come, is significant.
On September 29th, a seminar on "Application of blockchain technology in the digital economy" was held in Hanoi, co-organized by the National Assembly Committee on Science, Technology, and Environment and the Vietnam Blockchain Association. At the seminar, Lê Quang Huy, Chairman of the National Assembly Committee on Science, Technology, and Environment, highlighted the global adoption of blockchain in various sectors, including finance and energy. He also predicted that the blockchain sector will reach trillions of dollars in market capitalization by 2030. It is rare to see such a strong pro-blockchain stance from the chairman of a national organization in Vietnam, which is noteworthy.
Vietnam is slowly but surely evolving its stance on blockchain and cryptocurrencies. While there is still no specific legal documentation, recent government actions suggest that there will be positive changes in this area.
2) Local chain Tomochain: Acquisition by Coin98 and rebranding to Viction
On May 25th, the local Vietnamese chain TomoChain was acquired by Coin98. On November 1st, the company rebranded itself as “Viction” and announced a new vision called "Victory Vision". This vision states that the blockchain's goal is to focus on mass adoption. From this, we can expect to see a number of services launched in Vietnam in the coming months. However, the rebranding does not come with any technical adjustments, except for the change of the native token $TOMO to $VIC.
3) NEAR APAC held in Vietnam
Held on September 9th-10th, 2023 in Ho Chi Minh City, Vietnam, NEAR APAC was a large-scale event focused on the development of blockchain in the Asia-Pacific region, with the theme "Ultimate Future". The event attracted more than 8,000 attendees, including more than 100 global blockchain leaders, 1,000 developers, students from more than 10 universities, 300+ projects and startups, and representatives from more than 100 companies.
The event featured discussions on innovative technology trends and their potential, such as the tokenization of Real World Assets (RWA) and the integration of artificial intelligence and blockchain. In particular, there was a lively debate on how the combination of blockchain and AI can bring new opportunities to the Web3 ecosystem and how these technologies can contribute to solving real-world problems.
The event also emphasized the importance of Asia, particularly the Vietnamese market. It was suggested that Vietnam's rapid digital growth and young demographic are making the region a center of blockchain and cryptocurrency growth. This shows how Asia is becoming a major center of attention for the global blockchain community in the development of Web3.
4) KyberSwap hack and resolution process
On November 23rd, KyberSwap was hit by a reentrancy attack. The attack resulted in a loss of approximately 47 million USD, which caused KyberSwap's total value locked (TVL) to drop by 90%. At the center of the attack was a vulnerability in the mint function of KyberSwap's new token KS2-RT. By exploiting this vulnerability, hackers were able to steal funds across multiple networks.
After recognizing the breach, Kyber issued an urgent warning to users to withdraw funds as a precaution. It later announced that it had reached an agreement with the hackers who stole 5.7 million USD, returning 90% of the funds to the KyberSwap distribution address on Polygon, or about 4.67 million USD. Security measures in major DeFi projects are still a work in progress, and it is unfortunate to see major hacking incidents continue to occur.
5) The Global CEX Crisis and the DeFi Transition
However, there is one area where our partners in Vietnam are divided. Recent events from centralized exchanges such as Binance have created a sense of unease among users, accelerating the shift to alternative DeFi exchanges. In addition, many DeFi exchanges are accelerating this transition by building more user-friendly environments. On the other hand, some users argue that the experience of centralized exchanges is still dominant and the most familiar. They believe the presence of Binance, as well as other CEX exchanges operating in Vietnam, is preventing a mass migration to DeFi exchanges.
Markets keep moving
To summarize, Vietnam's Web3 market is witnessing the early stages of regulatory change and is also continuing to move forward with major local projects continuing to grow. While there may be mishaps and challenges, this is still meaningful as it shows that the projects are not stagnant, but are constantly evolving.
In addition, Vietnam’s vast pool of developers continues to expand through training at Vietnam's national universities and elsewhere. As these strengths continue to grow, and as the existing regulatory uncertainties in the Vietnamese market are gradually resolved, we are confident that local projects in Vietnam will mature to have a significant and positive impact on the market.
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