The State Bank of Vietnam Governor Nguyen Van Giau announced that foreign exchange rates on the unofficial currency market will drop in coming days as the authorities launch a crackdown on illegal dollar hoarding and trading.

On Tuesday, Giau told reporters that Vietnamese law enforcement agencies are making a strong push to shut down illegal dollar traders and hoarders while government officials move toward flexible and cautious monetary policies.

In the past, officials from the bank had said that enforcement sweeps need to be accompanied by a de-dollarization plan.

The government said in a statement Thursday that it is considering a steep (seven-fold) increase in fines for illegal foreign currency trading that could cost offenders as much as VND500 million.  

Last weekend’s crackdown brought the unofficial foreign exchange market in Hanoi to a standstill. Meanwhile, many gold shops in Ho Chi Minh City have ceased buying and selling dollars publicly to avoid stepped up government oversight.

A dealer in Hanoi told Thanh Nien that he only does business now with regular clients.

“Strangers may be police officers in disguise and I would be in trouble,” he said.

Economist Le Xuan Nghia said the black market in Vietnam is worth at as much as tens of billions of US dollars. To successfully manage the market, the country needs to embrace a holistic policy shift.

Nghia said that the powerful black market popped up due to demand for unofficial dollar trading. When Vietnam can ease that demand and manage its official exchange rate well, the black market will eventually dry up.