Prosecutors in the south-central province of Khanh Hoa have rejected a police request for charges against three individuals involved in a recent Bitcoin transaction, highlighting Vietnam’s legal confusion about the currency.

A source from the office confirmed, on Tuesday, that they had just dismissed the charges proposed against Nguyen Van Minh, Nguyen Duy Trinh and Nguyen Van Thong for selling and buying Bitcoins.

Vo Ngoc Sang, deputy head of the Khanh Hoa prosecution unit, said the three did not engage in an illegal transaction since Bitcoins are not a recognized currency or commodity in Vietnam and therefore cannot be considered a banned item.

In March, Khanh Hoa police arrested the three men for trading Bitcoins.

During their arrest on March 15, officers seized computers, documents and nearly VND500 million in cash from Minh’s construction consultation company and Thong’s trading company.

A source from the Khanh Hoa Police said they will stick to their case and will send a statement to the nation's top prosecution unit, the Supreme People’s Procuracy.

“The men were making profitable investments. They had made a lot of trades that involved a large amount of real money at many banks,” the officer said.

Ho Chi Minh City-based VBTC Vietnam cooperated with Israeli company Bit2C to launch the country’s first exchange on July 9 at www.vbtc.vn, following a pilot run in late June.

In February, the State Bank of Vietnam said it did not recognize the Bitcoin as a valid currency, citing similar rulings by courts in Thailand, China, Malaysia, and Indonesia.

Russia, France, and Norway have also rejected the currency.

The e-commerce department at the Ministry of Industry and Trade likewise rejected the company’s efforts to establish the exchange floor on the grounds that Bitcoins are not a recognized in Vietnam.

Nguyen Tran Bao Phuong, co-founder and managing director of VBTC Vietnam, claimed that the ruling did not translate to a government prohibition on the trade of Bitcoins.

Phuong compared Bitcoins to the Internet, which Vietnam introduced in 1995 after a long period of consideration.

She said her company has been campaigning for the “undeniable” benefits of Bitcoins to several government agencies.

Ho Sy Niem from the Crime Police Division at the Ministry of Public Security, said several localities have brought cases involving Bitcoin transactions to the ministry.

Niem said the Khanh Hoa prosecutors made the decision based on current laws.

Last year, his division followed a similar case that was brought to court in the northern city of Hai Phong.

That case, however, involved malfeasance on the part of the Bitcoin trader, he said.

Lawyer Nguyen Van Hau, vice chairman of Ho Chi Minh City Lawyers' Association, said the government remains “confused” by Bitcoins, which continue to be traded more and more.

To impose any criminal charge on the Bitcoin trade would be inappropriate, Hau said, “especially when the currency has not been subject to any legal regulations.”

The first Bitcoin exchange was introduced on open source software in 2009 by Satoshi Nakamoto, possibly a pseudonym for one or more programmers.

Transactions using Bitcoins have been conducted in a dozen countries in Europe and America; the currency itself is considered an asset.

Analysts said Bitcoins provide little guarantee of payment as there is no central authority or bank to take responsibility for their authenticity or provide protection in case of fraud.

Mt. Gox in Tokyo (one of the two world’s largest Bitcoin exchanges along with Bitstamp in the UK) collapsed on February 18 after 850,000 Bitcoins worth US$473 million were reportedly lost or stolen in a cyber-attack.

Bitstamp suspended withdrawals for several days due to a distributed denial-of-service attack.