Beijing fears virtual money's influence

[R.A. Hettinga]

--- begin forwarded text


  Date: Wed, 7 Mar 2007 00:28:29 -0500
  To: Philodox Clips List <clips at philodox.com>
  From: "R.A. Hettinga" <rah at shipwright.com>
  Subject: Beijing fears virtual money's influence


<http://www.ft.com/cms/s/6e4d7c84-cc17-11db-a661-000b5df10621,dwp_uuid=9c33700c-4c86-11da-89df-0000779e2340,print=yes.html>

  The Financial Times


  ASIA-PACIFIC


  CHINA


  Beijing fears virtual money's influence

  By Mure Dickie in Beijing

  Published: March 6 2007 19:32 | Last updated: March 7 2007 02:16

  China has issued restrictions on the use of "virtual money" from internet
  games, warning such currencies could threaten real-world financial
  stability.

  The ban on using virtual money to buy "material products" is part of a
  wider tightening of controls that includes a renewed crackdown on the cafes
  where many of China's estimated 137m internet users go online.

  Beijing's move highlights the blurring boundaries between online and
  offline worlds. Governments and judiciaries elsewhere are also struggling
  to decide how to regulate online economies that have spawned multi-million
  dollar businesses trading virtual items and currencies for hard cash. But
  few view them as a threat to the world financial system.

  The restrictions follow Beijing's growing concern about the influence of
  currencies created by internet companies, particularly the wildly popular
  "QQ Coins" issued by Hong Kong-listed messaging and games provider Tencent.

  Tencent's messaging system is used by an estimated two-thirds of Chinese
  internet users and its QQ Coins have been accepted as payment by other
  companies as well as sold for legal tender.

  A formal notice quietly issued to officials last month by the Communist
  party and government departments, including the central bank, has ordered
  "strict differentiation between virtual exchanges and online commerce in
  material products".

  The notice says: "The People's Bank of China will strengthen management of
  the virtual currencies used in online games and will stay on the lookout
  for any assault by such virtual currencies on the real economic and
  financial order."

  Virtual money can only be used to buy virtual products and services the
  companies provide themselves, issuance will be limited, and users are
  "strictly forbidden" from trading it into legal tender for a profit, says
  the notice.

  The curb on virtual money reflects concerns that it has been used to
  circumvent China's strict laws against gambling.

  Tencent and other internet companies offer forums where people can play
  online versions of games such as mahjong using virtual money, although
  Tencent says it has "adjusted" its services in recent months and that they
  now "accord entirely with government instructions".

  China is in the throes of a campaign to "purify" the internet, and most of
  the content of the notice was aimed at tightening controls over the
  country's estimated 113,000 internet cafes. It blamed internet cafes for
  fostering "internet addiction", banned approval of new ones this year and
  toughened penalties for those that admit minors. Crackdowns in 2002 and
  2004 had a limited impact.


  --
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  R. A. Hettinga <mailto: rah at ibuc.com>
  The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
  44 Farquhar Street, Boston, MA 02131 USA
  "... however it may deserve respect for its usefulness and antiquity,
  [predicting the end of the world] has not been found agreeable to
  experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'