ABSTRACT: This article focuses on identifying and analyzing “legal bottlenecks” inadequacies, overlaps and legal gaps between the current system of normative legal documents and new social relations emerging in practice. The rapid development of the digital economy, artificial intelligence (AI) technologies, and new business models, such as the sharing economy and virtual assets, together with ongoing changes in social structures, is occurring at a pace faster than the capacity of the legislative system to respond. Consequently, these gaps create barriers to economic development, pose challenges to state management, and affect the legitimate rights and interests of citizens. Based on an analysis of the root causes, including traditional management mindsets, lengthy legislative processes and the lack of appropriate experimental mechanisms, the article proposes strategic solutions, such as adopting controlled experimental mechanisms (Sandbox), shifting toward a dynamic regulatory approach and streamlining the law-making process. These measures aim to enhance the compatibility between the legal system and the evolving realities of social life, thereby contributing to more effective institutional development and governance.
l Keywords: legal bottlenecks; social reality; digital economy; legal gaps; experimental mechanisms; state management; institutional development.
INTRODUCTION
Law is a system of general rules of conduct promulgated by the State, reflecting the will of the ruling class and serving as an instrument for regulating social relations. The inherent nature of law is characterized by stability and structure. By contrast, the realities of socio-economic life constitute a continuous and constantly changing process, particularly in the context of the Fourth Industrial Revolution (Industry 4.0) and the trend toward global integration.
The movement of these two domains at different speeds inevitably creates legal gaps or direct conflicts, collectively referred to as “bottlenecks.” Legal bottlenecks arise when existing regulations become too restrictive, outdated, or incapable of covering new economic models, or when they create administrative barriers that constrain development. Identifying and analyzing the nature of these bottlenecks and finding solutions to remove them is an urgent task for improving the legal system, promoting sustainable economic development, and ensuring social equity.
I. THEORETICAL FOUNDATIONS OF THE GAP BETWEEN LAW AND SOCIAL PRACTICE
1. The static nature of law and the dynamic nature of social practice: The legislative process requires rigor in order to ensure predictability and legal certainty for relevant stakeholders. From the stages of research and drafting to appraisal, adoption and entry into force, the enactment of a law generally takes two to three years. Consequently, law inevitably involves a certain degree of “regulatory lag”.
The realities of social life, particularly economic and technological relations, change on a daily and even hourly basis. When a new business model emerges, it can immediately begin operating in practice, even when no specific legal provision has yet been enacted to regulate it.
2. Root causes of legal bottlenecks: The forecasting capacity of drafting authorities has not kept pace with the rapid changes in digital economic models and financial technologies.
The tendency to adopt a “ban it if it cannot be managed” approach, or to apply regulatory instruments designed for the traditional physical economy to the digital economy, creates asymmetries and undermines incentives for innovation.
Conflicts between laws and subordinate legal documents, such as decrees and circulars, or between different sector-specific laws, undermine the effectiveness of legal implementation.
II. KEY BOTTLENECKS BETWEEN LAW AND CURRENT SOCIAL REALITIES
+ Bottleneck 1: The Digital Economy, New Business Models and the Regulatory Sandbox
1. Emerging social realities: The rapid expansion of sharing-economy models, including Uber/Grab in the past and accommodation-sharing platforms such as Airbnb, financial technology (Fintech and peer-to-peer lending – P2P Lending), digital assets, cryptocurrencies and decentralized autonomous organizations (DAOs), has generated millions of transactions every day and enormous flows of capital, much of which remains outside the official oversight of the banking and tax systems.
2. Current legal regulations: Digital assets and cryptocurrencies: The current Civil Code recognizes assets as including objects, money, valuable papers and property rights. Cryptocurrencies are not recognized as legal means of payment. As a result, the State loses potential tax revenues, while citizens lack adequate legal protection when fraud or disputes occur.
Meanwhile, the Law on Credit Institutions strictly regulates credit-granting activities. P2P companies essentially operate as technology-based financial intermediaries but must register under the category of “financial consulting services”, resulting in a blurred boundary with illegal lending activities, commonly referred to as “loan-sharking”.
3. Analysis of conflicts and consequences: The delayed introduction of a regulatory Sandbox mechanism has forced Vietnamese technology enterprises to establish legal entities in Singapore and the Cayman Islands, resulting in a loss of human capital and a drain of venture capital. Due to the absence of a clear legal status for digital assets, fraudulent multi-level cryptocurrency schemes have proliferated, causing serious consequences for public order and security. However, criminal prosecution has encountered difficulties because the value of losses cannot be determined under traditional legal provisions.
A typical illustration of this conflict is the Sky Mining cryptocurrency case: In 2018, the Sky Mining case and other disguised multi-level cryptocurrency schemes attracted significant public attention. Sky Mining, a virtual-currency mining cooperative in Ho Chi Minh City, raised tens of millions of US dollars from thousands of investors to purchase “virtual-currency mining machines”, promising exceptionally high returns. The company’s general director subsequently disappeared with a large amount of money. When victims filed complaints, the procedural authorities faced difficulties in determining whether to initiate proceedings for “fraudulent appropriation of property” or “illegal business activities”. The underlying issue was that Vietnamese law had not recognized cryptocurrencies as either assets or currency. Valuing victims’ losses based on the amount of “virtual currency” lost therefore lacked a clear legal basis for comprehensive resolution. Another example is the Sky Mavis and Axie Infinity case, which illustrates the legal “migration” of technology startups. In 2021, the blockchain game Axie Infinity, developed by Sky Mavis, a company founded by Vietnamese entrepreneurs, achieved global prominence, with its market capitalization reaching nearly USD 10 billion at one point. Although its core engineering and operational teams were based in Vietnam, Sky Mavis chose Singapore as the jurisdiction in which to establish its legal entity and raise capital. This was attributed to the absence of a legal framework in Vietnam governing GameFi, tokens and digital assets. As a result, foreign investment capital flowed into Singapore rather than Vietnam, while Vietnam also lost substantial potential corporate tax revenues. This reality demonstrates that, without a timely legal framework, the consequences extend beyond the economic sphere and may also threaten social stability.
+ Bottleneck 2: The Real Estate and Land Markets and New Forms of Distribution
1. Emerging social realities: The emergence of hybrid real estate products, such as Condotels (hotel apartments), Officetels (office apartments), Shophouses and more recently, the fractionalization of real estate for collective investment through Blockchain-based technology (Tokenization), has created new forms of property ownership and investment. Demand among individuals and investors for owning and trading these types of assets is substantial due to their flexibility and relatively low capital requirements.
2. Current legal regulations: Although the new Land Law and Law on Real Estate Business have introduced a number of amendments, the issuance of certificates of ownership (“pink books”) for Condotels continues to face significant obstacles in many localities due to conflicts between the designated land-use purpose (commercial and service land, not intended to establish residential units) and individuals’ ownership rights over assets constructed on such land. The fractionalization of real estate through asset tokenization is currently not specifically regulated, leaving purchasers exposed to significant legal risks if a project developer becomes insolvent.
3. Analysis of conflicts and consequences: Hundreds of resort real estate projects worth billions of US dollars have been left stalled or become subject to prolonged disputes between customers and developers because ownership certificates cannot be issued. This has drained economic resources. The lack of clarity in defining the rights and obligations associated with new forms of real estate has increased the number of mass complaints and placed substantial pressure on local state management authorities.
A typical illustration of this conflict is the Condotel case: The collapse of the profit-guarantee scheme at the Cocobay Da Nang Project in 2019. Cocobay Da Nang was once a major Condotel project that offered customers purchasing hotel apartments a guaranteed return of 12% per year. By the end of 2019, the developer, Thanh Do, announced that it would cease paying the guaranteed income due to cash-flow difficulties and legal obstacles. The case clearly exposed gaps in the Law on Real Estate Business and the Land Law. Customers had paid billions of Vietnamese dong but were unable to obtain long-term ownership certificates (“pink books”) because the project land was classified as commercial and service land with a fixed term. The prolonged dispute between thousands of customers and the developer became a major source of complaints and effectively froze Vietnam’s resort real estate market from that point onward.
+ Bottleneck 3: Labor Relations in the Gig Economy (Freelance Employment Economy)
1. Emerging social realities: The technology-based workforce, including ride-hailing drivers, delivery workers and freelancers working through platforms such as Upwork and Fiverr, has grown at an exceptionally rapid pace. These workers devote their working time to platform activities and are subject to management, control and income allocation through algorithms operated by platform companies such as Grab, Shopee, and Baemin.
2. Current legal regulations: The Labor Code defines an employment relationship on the basis of three elements: An agreement between the parties, payment of wages and the management, direction and supervision of one party over the other. Technology companies circumvent these provisions by entering into “business cooperation agreements” or “partner agreements”. Driver-partners are therefore not legally classified as employees.
3. Analysis of conflicts and consequences: Millions of vulnerable workers are deprived of basic rights and benefits, including social insurance, health insurance, occupational accident insurance, trade union representation and limits on working hours. The phenomenon of technology drivers turning off their applications and engaging in spontaneous work stoppages has occurred frequently when platforms change commission policies. This can disrupt traffic and create social instability because there is no formal legal mechanism for dialogue.
A typical illustration of this conflict is the case of technology drivers: waves of application shutdowns and collective work stoppages among Grab and ShopeeFood drivers. Specifically, in major cities such as Hanoi and Ho Chi Minh City, thousands of GrabCar and GrabBike drivers, as well as ShopeeFood delivery workers, have repeatedly shut down their applications simultaneously and gathered in large numbers to protest unilateral changes by technology companies to commission rates, increases in service fees or the introduction of new incentive algorithms that reduce their incomes.
The resulting legal consequences are significant. Because drivers sign “partner agreements” rather than “employment contracts”, they are not protected by trade unions and cannot legally organize strikes under the Labor Code. State management authorities, including the Department of Labor, War Invalids and Social Affairs, cannot intervene extensively because such disputes are regarded as civil or commercial disputes between two independent business entities. Workers are therefore placed in a highly vulnerable position when confronting the algorithms of transnational platforms.
+ Bottleneck 4: Administrative Procedures, Public Investment, and the “Fear of Making Mistakes and Fear of Responsibility”
1. Emerging social realities: The need to disburse public investment funds, approve private investment projects and procure medical and educational equipment has become extremely urgent in order to support economic recovery and development. However, the pace of project approval and disbursement in many localities has become seriously stagnant.
2. Current legal regulations: The regulatory framework governing investment, bidding, land, construction, and environmental protection is dispersed across multiple laws, with numerous inconsistencies and conflicts among them. For example, there are inconsistencies regarding the authority to approve investment policies between the Law on Investment and the Law on Housing. Provisions concerning the offense of “violating regulations on the management and use of state assets, causing loss and waste” under Article 219 of the Criminal Code are highly qualitative in nature and do not clearly distinguish between intentional violations committed for personal gain and objective errors made in the course of implementation for the common interest.
3. Analysis of conflicts and consequences: Officials and civil servants have developed a tendency to become increasingly cautious, “passing the buck” and “avoiding responsibility”, referring matters to higher authorities or repeatedly seeking opinions through lengthy administrative channels. The prevailing mentality is that it is safer to remain inactive and avoid making mistakes than to take action and subsequently face legal consequences. As a result, available funds cannot be utilized, while businesses with sufficient financial resources are unable to implement projects because they are waiting for administrative procedures to be completed. This erodes national competitiveness and slows the pace of development across society.
A typical illustration of this conflict is the healthcare sector case: The shortage of medicines and medical supplies at public hospitals during 2022-2024. Following a series of cases involving violations in the procurement of medical equipment, such as the Viet A case and cases involving Bach Mai Hospital and Hanoi Heart Hospital, many major hospitals across the country experienced serious shortages of medicines, testing chemicals and medical supplies. Patients were forced to purchase basic medical supplies themselves, even items such as rolls of gauze and syringes. The bottleneck lies in the fact that the Law on Bidding and older implementing regulations stipulated that the winning bid price in a subsequent year had to be lower than that of the previous year or that three quotations had to be obtained. In practice, many proprietary chemicals could not be supported by three quotations. Healthcare officials and hospital leaders were therefore reluctant to sign and approve procurement decisions for fear of violating qualitative provisions concerning “causing loss of state assets”. They opted for the safer approach of repeatedly “seeking opinions through multiple levels” or refraining from conducting procurement procedures altogether, accepting shortages of equipment and supplies in hospitals.
III. COMPREHENSIVE ASSESSMENT OF THE IMPACTS OF LEGAL BOTTLENECKS
1. Economic impacts
- Increased compliance costs: Enterprises must incur substantial opportunity costs to review regulations and seek guidance from competent authorities on matters that have not been clearly addressed by law.
- Undermined incentives for innovation: Domestic technology startups lack sufficient room to operate and are therefore forced to relocate their business models abroad, turning Vietnam into a consumer market rather than a country that exports technological solutions.
2. Social impacts
- Income inequality and the gap between the rich and the poor increase when workers in emerging technology-based occupations are not adequately protected.
- Civil and economic conflicts and disputes can escalate into hotspots affecting public order and security due to the lack of appropriate arbitration and legal adjudication mechanisms.
3. Impacts on national governance
Legal bottlenecks reduce the effectiveness and efficiency of state management. A legal system that responds slowly to crises or emerging trends will gradually lose its role in providing strategic direction and macro-level regulation.
IV. BREAKTHROUGH SOLUTIONS TO REMOVE LEGAL BOTTLENECKS
To address the root causes of the bottlenecks identified above, a comprehensive reform strategy is required, covering legislative thinking, regulatory instruments, and enforcement mechanisms.
1. Changing legislative thinking: From “management” to “development facilitation”
- Shift from a closed regulatory approach, under which only activities explicitly permitted by law may be carried out, to an open approach, under which activities are permitted unless prohibited by law, particularly in the fields of the digital economy and innovation.
- Improve the quality of forecasting by strengthening the participation of independent experts, business associations and representatives of affected groups in the process of drafting legal normative documents.
2. Institutionalizing a controlled legal experimentation mechanism
- Enact a framework law or a general decree on the Sandbox mechanism, rather than applying separate mechanisms to individual sectors. This mechanism should allow enterprises to test new technologies and business models, such as digital assets and P2P Lending, within a limited scope and for a limited period under the direct supervision of regulatory authorities.
- Upon completion of the testing period, if a model demonstrates safety and effectiveness, it should be promptly incorporated into the legal framework for broader application. If significant risks are identified, a safe-exit mechanism should be established without imposing criminal liability on the entities participating in the experiment.
3. Amending and supplementing core laws to cover emerging social relations
a. Digital economy and Digital assets: Add the concepts of “virtual assets” and “digital assets” to the Civil Code as a category of property rights. Develop a Law on Digital Asset Management to clearly regulate mechanisms for registration, transactions, ownership protection and tax obligations applicable to such assets.
b. Labor and Social security: Expand the scope of application of the Labor Code by adding “platform workers” as a specific category of workers. Require technology companies to share the costs of occupational accident insurance and social security contributions based on the proportion of revenue generated from rides or orders, thereby ensuring minimum rights and benefits for workers.
c. Land and Real estate: Establish clear and consistent regulations on mechanisms for issuing ownership certificates for multi-purpose real estate products, such as Condotels and Officetels, while clearly distinguishing between long-term ownership rights over assets and the fixed-term land-use purposes of projects.
4. Mechanisms to protect officials who dare to think and act and to harmonize the legal system
- Institutionalize Conclusion No. 14-KL/TW of the Politburo through legally binding regulatory documents of sufficient legal force, such as a decree or law. Clearly establish provisions on “legal liability exemption” for officials and civil servants who implement decisions in the public interest and undertake breakthrough initiatives but encounter overlapping or outdated legal provisions.
- Conduct a comprehensive review of the legal system and apply the principle of “one law amending multiple laws” to thoroughly address conflicts among the Law on Investment, Law on Bidding, Land Law and Law on Construction.
The gap between current legal regulations and emerging social realities is an objective and widespread phenomenon in every country. However, the extent and duration of such gaps are important indicators of a State’s governance capacity. The bottlenecks currently affecting Vietnam’s digital economy, crypto assets, emerging real estate markets, Gig labor relations, and administrative operations are not merely challenges; they also represent significant opportunities.
If we have the determination to confront these issues, shift our thinking from control to development facilitation, boldly apply flexible regulatory instruments such as the Sandbox mechanism and simultaneously accelerate the improvement of core legislation, the legal system can become a solid platform for the economy and society to achieve breakthrough development in the new era. Removing legal bottlenecks means unlocking one of the nation’s greatest sources of resources./.
Dr. Dang Thanh Nga
REFERENCES
- Resolution No. 27-NQ/TW (2022) of the Central Committee of the Communist Party of Vietnam, 13th National Congress, on continuing to build and improve the socialist rule-of-law state of Vietnam in the new period.
- Speeches and strategic directives of Party and State leaders concerning the removal of legal “bottlenecks,” the transformation of legislative thinking from “management” toward “unlocking resources” and facilitating development.
- Reports of the Government / Ministry of Justice on the results of reviewing legal normative documents.
- Textbook on General Theory of the State and Law, Ministry of Justice Publishing House: analysis of the relationship between law and the realities of social life.
- Legislative Studies Journal: In-depth articles on legislative techniques and reports reviewing overlaps and inconsistencies among sector-specific laws.
- “Vietnamese Law in the New Era: Identifying Bottlenecks and Directions for Resolution”, Cong Ly Newspaper.
