China bars use of virtual money for trading in real goods


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China has unveiled the first official rule on the use of virtual currency in the trade of real goods and services to limit its possible impact on the real financial system.

The government also spelled out the definition of "virtual currency" for the first time, which includes prepaid cards of cyber-games, according to a joint circular from the Ministry of Culture and the Ministry of Commerce Friday.

"The virtual currency, which is converted into real money at a certain exchange rate, will only be allowed to trade in virtual goods and services provided by its issuer, not real goods and services." it said.

China has the world's largest population of Internet users, with 298 million people online as of the end of last year.

According to media reports, the virtual money trade topped several billion yuan last year after rising around 20 percent annually.

Since 2007, virtual money trading has drawn official attention, with the government demanding tighter controls as such trading became an avenue for gambling and illicit trade.

Under the new rules, using virtual money for gambling will be punished by public security authorities, and minors may not buy virtual money.

The Ministry of Culture also vowed to step up supervision on money laundering via virtual credits and other illegal online activities.

The most popular Chinese online credits are "QQ coins" issued by Tencent. com, which has at least 220 million registered users. In a media statement Saturday, the company said it "resolutely" supported the new rule.

The statement said Tencent had strongly opposed the underground trading of virtual money, which could enable online theft and fraud. The company would work with the authorities to combat online crimes, according to the statement.

Cui Ran, an expert on the Chinese online industry, said the regulation aimed to "nip illegal online activities in the bud," as current trading volume was still too small to shake the nation's entire financial system.

But as the trade expanded steadily, with increasing conversions between virtual and real money, there would be an impact on the financial system, he noted.

News Release

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Does it apply to gold farming and sellers? Well, even it it does I don't see it having very much effect in the near to distant future. Gold sellers will just relocate their shops.

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In addition to its ongoing crackdown on Internet porn, the Chinese government has declared that virtual currency cannot be traded for real goods or services. Virtual currency, as defined by Chinese authorities, includes "prepaid cards of cyber-games," according to a joint release issued by China's Ministry of Culture and Ministry of Commerce on Friday.

"The virtual currency, which is converted into real money at a certain exchange rate, will only be allowed to trade in virtual goods and services provided by its issuer, not real goods and services," the Ministries said. The Chinese government estimates that trade in virtual currency exceeded several billion yuan last year, a figure that it claims has been growing at a rate of 20% annually. One billion yuan is currently equal to about $146 million.

The ruling is likely to affect many of the more than 300 million Internet users in China, as well as those in other countries involved in virtual currency trading. In the context of online role playing games like World of Warcraft, virtual currency trading is often called gold farming.

The most popular form of virtual currency in China is called "QQ coins," a form of virtual credit issued by Tencent.com.

Tencent.com, which has about 220 million registered users -- about as many as Facebook -- is quoted in the Chinese government news release as "resolutely" supporting the new rule. The government justifies its ban on virtual currency trading as a way to curtail gambling and other illegal online activities.

The extent to which the Chinese government will apply its virtual currency rule to online role playing games remains unclear. A report in the English-language China Daily says that in-game gear is not considered virtual currency, so selling virtual items may be allowed to continue.

The trading of virtual currency for real cash employs hundreds of thousands of people worldwide and generates between $200 million and $1 billion annually, according to a 2008 survey conducted by Richard Heeks at the University of Manchester.

He estimates that between 80% and 85% of gold farmers are based in China.

"[M]any online games have a virtual economy and an in-game currency," he states in his survey. "Gold farmers can play in-game to make some currency. They then sell that for real money -- typically via a Web site and using the PayPal payment system -- to other players of the game."

Game companies typically forbid gold farming but committed virtual currency traders find ways around such rules. Some game companies have recognized the futility of trying to ban the practice and have built virtual commerce into their game infrastructure.

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Updates: currency conversion corrected, added China Daily reference.

Source: http://www.informationweek.com/news/intern...cleID=218101859

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Well, I hope this actually does something in terms of preventing gold farming/selling. On the other hand, WoW's subscriber base will shrink some so they won't be able to claim 11 million players anymore. :rofl:

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