Vietnam Bans Use of Gold Bullion as Money

VIETNAM'S government this week banned the use of Gold Bullion as a medium of exchange, according to a report on Hanoi-based economics website Vietnamica.

Decree number 24/2012/ND-CP, issued by Vietnam's prime minister Nguyen Tan Dung, lists seven prohibited Gold Bullion related activities.

These include using gold as a medium of exchange, manufacturing gold jewelry without a license from the central bank, trading Gold Bullion without a license, and doing any other gold related business without the prime minister and central bank's approval.

The new decree, which comes into effect on May 25, will oblige Vietnamese to cease using Gold Bullion to settles high value transactions such as real estate deals. However, "it is hard to see the Decree changing Vietnamese behavior of using gold" says the Vietnamica report.

The decree also imposes several requirements on firms in the gold industry, stipulating for example minimum levels of capital firms should hold, how much in tax they need to have paid over the last two years, and the equipment jewelry manufacturers should use. It is the culmination of several draft decrees that were issued last year, and follows comments from Vietnam's central bankers regarding privately-held Gold Bullion.

Last November, former State Bank of Vietnam governor Cao Sy Kiem suggested the use of gold certificates to 'mobilize' Gold Bullion in private hands. Current SBV governor Nguyen Van Binh made similar comments about 'mobilizing gold' earlier this year.

Van Binh announced last year that the central bank had "administratively acquired" Gold Bullion refiner Saigon Jewelry Co,  after it was granted an effective monopoly by an SBV decree specifying a minimum market share of 25%. At the time of the decree, SJC's market share was 90%.

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