China Restricts 'Virtual' Economies

by John D. Sutter

	$8      $5

As Internet-based economies edge closer to their real-world counterparts, one country is apparently trying to build a wall between the two.

China has announced new rules that prevent "virtual currencies" like Linden Dollars and QQ coins from being traded for real cash.

"It's a pretty important step," said Edward Castronova, a professor at the University of Indiana who studies virtual currency. "These virtual currencies, as they grow, are going to become competitors to real-world currencies – and apparently that's what happening in China. These QQ coins are becoming things you can use at the corner store to top off your bill."

It's difficult to say how large virtual economies have become, because governments don't conduct surveys, Castronova said, but the popularity of online cash is reportedly growing by as much as 20 percent per year.

Virtual worlds like Second Life allow users to buy clothes, cars and land for their virtual characters, or avatars. And online cash has become important in online games and social networks, where users can buy trinkets to give to their friends or power-ups for their video game characters.

China's ruling does not prevent gamers from purchasing virtual money. It stops the cash flow in the other direction, meaning online-only money can't be converted back into dollars or yuan, an online statement from China's Ministry of Commerce says.

Read the rest of the article

July 2, 2009

Copyright © 2009 CNN