Non-fungible tokens (NFTs) or cryptographic tokens are unique digital signatures or tokens created by using blockchain technology, in particular using relevant platforms that operate on blockchains, which are used for certifying ownership of digital files of real or intangible assets.
Cryptographic tokens represent a set of rules, encoded in a smart contract – the token contract. Every token belongs to a blockchain address. These tokens are accessible with dedicated wallet software that communicates with the blockchain and manages the public-private key pair related to the blockchain address. Only the person who has the private key for that address can access the respective tokens. This person can, therefore, be regarded as the owner or custodian of that token. If the token represents an asset, the owner can initiate the transfer of the tokens by signing with their private key, which in turn generates a digital fingerprint or digital signature. If the token represents an access right to something somebody else owns, the owner of that token can initiate access by signing with their private key, thereby creating a digital fingerprint.
Cryptocurrencies utilize this technology to ensure that each unit of the currency is individual and non-reproducible, thus, each unit of the cryptocurrency is represented by a single block on the blockchain and as the blockchain is reproduced and certified countless times during each new transaction, it is impossible to alter the initial entry on the blockchain and thus alter the value or nature of the cryptographic token it represents. While crytptocurrencies are the most visible and popular use of blockchains, NFTs have increasingly gained in popularity as a means of promoting the sale and ownership of intellectual property rights (IPRs).
Tokens as Currency
Not all tokens are NFTs, however, and many tokens are represented as cryptocurrency or represent other assets beyond simply those involved with IPRs. In Vietnam, tokens are not currently recognized as property or, in the case of the asset being money, i.e., cryptocurrency, as a legal means of payment.
Tokens that represent assets being money, i.e., cryptocurrency, are not allowed by law for use as a means of payment. According to Decree 101, unlawful payment instruments are any payment instruments that are not specifically allowed. Specifically allowed payment instruments include: cheques, payment orders, authorized payment orders, collection orders, authorized collection [encashment] orders, bank cards, and other payment instruments as stipulated in State bank regulations. So far the SBV has not specifically allowed for tokens as a legal means of payment in Vietnam and has, in fact, explicitly stated that cryptocurrency is not a lawful means of payment.
According to the Civil Code, Property comprises objects, money, valuable papers, and property rights and includes immovable property and movable property. Immovable property and movable property may be existing property or off-plan property. Off-plan property includes non-formed property and formed property that the entity has established his/her ownership rights after the time of transaction establishment. Property rights are rights that are able to be valued in money, including property rights to subjects of intellectual property rights, the right to use land, and other property rights.
Property Rights in Tokens
While tokens, whether cryptocurrency or another form that represents money, cannot be used as a means of payment, it is possible they may be deemed property. While the digital representation of assets is not specifically stated in the definitions of property under the Civil Code, it is possible that a token represents a property right. In the case of NFTs the token is a unique digital address that represents a specific asset and gives the owner of the NFT the right of sole ownership of the asset which it represents. This has been most developed in the world of art where NFTs that represent individual and unique works are sold and the buyer then possesses the token. However, the token itself does not possess any property rights as it is merely a unique signature that is representative of the underlying artwork. The piece of art may be copyrighted and possess IPRs, but the token representing it is simply an address on a blockchain and does not possess any individual IPRs itself. The rights in the NFT can be valued in money, however, as has been demonstrated by the recent auctions of NFTs representing artwork that have reached several millions of dollars. This means they may be considered property under the definition of property rights in Vietnam’s Civil Code. It should be noted that while this definition may be interpreted to include NFTs as a property right and thus as property, there has been no legal framework governing the sale or purchase of NFTs or any of the rights and obligations related to NFTs.
There has so far been only one instance of an NFT platform in Vietnam, CongTroi.org is an NFT marketplace for Vietnamese artwork. It is hosted offshore and artwork can be purchased using VNDC, a stablecoin pegged to the Vietnamese Dong. While this may represent Vietnamese artwork, it is not actually operating in Vietnam. To my knowledge, there are no other uses of NFTs in Vietnam.
Cryptographic tokens and the underlying blockchain technology that they utilize have the potential to revolutionize several sectors of the global economy. However, it is important to distinguish the tokens themselves from the assets they represent. In the case of NFTs, often they represent actual IPRs that can be enforced and need to be maintained against infringement. This does not, however, imbue the NFTs themselves with the same rights as the IPRs to which they are attached. In the case of cryptocurrency, tokens have no intrinsic worth other than the value attached to the use of computing power and the amount of money that someone is willing to pay for them. Other uses of tokens may be developed and the legal systems of those countries whose citizens engage in their pursuit must be advanced to handle the challenges that these technologies create.
In Vietnam, tokens remain largely unregulated. While cryptocurrency is currently prohibited as a means of payment, it is also being examined by the state bank of Vietnam with the possibility of adoption within the next five years. NFTs are completely unregulated, though the underlying assets, primarily IPRs, can be protected using the existing intellectual property laws. The treatment of the tokens themselves, however, remains unclear under Vietnam’s regulations. Blockchain technology has been included in the list of FinTech to be included in the proposed regulatory sandbox that was suggested under the last prime minister. However, there has been no further action to suggest the government or ministries are ready to address the multiplying issues surrounding cryptocurrency, NFTs, and cryptographic tokens in general.