China outlaws virtual currency for real-world items

China has passed a new law that makes the purchase of physical goods with virtual currency a law, but this may not have as large an effect on gold farming as it at first seems.

In a world of increasingly virtual human interactions, the idea of money is becoming more fluid than authorities find comfortable. China has officially outlawed the practice of exchanging virtual currency for real goods, and minors are no longer able to buy the virtual cash. These rules will help the government control trade in China, but they could also impact the huge gold-farming industry that exists in the country.
It's easy to understand why China has such a problem with "virtual" currency being used for so many purposes. Tencent QQ is China's most popular instant-messaging client, offering a currency called "QQ Coins" that are used for purchasing items for their online identity. This currency has become popular among the youth, and now many online stores will accept the coin as actual payment for goods or online gaming. Using this virtual currency for real-world transactions outside of the messaging service makes it an ideal way to hide transactions, giving organized crime a potential route to launder money.

The new law makes the acceptable uses of this currency clear. "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 government explained.

So will this law hurt the gold farming industry? It's hard to say at the moment, but common sense says that with so many people making so much money from the practice, the gold farming business has its own momentum that makes enforcing legislation a challenge. Minors will no longer be able to buy gold or other in-game currencies with actual money, and the selling of the in-game cash for real-world money seems to run afoul of the new rules. The loophole? Gamers could still use the gold to buy in-game items, which could then be sold to other players to be converted back into gold. That adds an extra layer of complexity for selling in-game money, but shows how easily the law can be subverted.

There are also questions raised by the new law. If prepaid cards are considered virtual currency, will gamers be asked to provide identification showing they are of legal age before buying time on their favorite games? Only currency is named in the law, meaning that virtual items or even characters can still be bought and sold. As long as there is a stable economy without too much fluctuation in prices, anything online can be used as a currency, making the language potentially vague. Gamers can make actual money by buying and selling virtual currency—sometimes even across games—which makes the very definition of currency fluid. If enough people agree that a virtual blue T-shirt is worth a certain amount of yuan, that shirt can become as good as the QQ Coins that were used to buy it, which were of course as good as cash to many retailers already.

By Ben Kuchera