The E-Sylum:  Volume 10, Number 13, April 1, 2007, Article 14

CHINESE OFFICIALS CRACK DOWN ON VIRTUAL CURRENCY

We recently reported on the growth of "virtual currency" in online 
worlds. Friday's Wall Street Journal reported that "China's fastest- 
rising currency isn't the yuan. It's the QQ coin -- online play money 
created by marketers to sell such things as virtual flowers for 
instant-message buddies, cellphone ringtones and magical swords for 
online games.

"It's the most extreme case of a so-called virtual currency blurring 
the boundaries between the online and real worlds -- and challenging 
legal limits. A Chinese Internet company called Tencent Holdings Ltd. 
designed the payment system in 2002 to allow its 233 million regular 
registered users to shop for treats in its virtual world. Virtual 
currencies are in use in many countries -- but nowhere have they 
taken root more deeply than in China."

"Then last year something happened that Tencent hadn't originally 
planned. Online game sites beyond Tencent started accepting QQ coins 
as payment. The coins appeal as a safer, more practical way to conduct 
small online purchases, because credit cards aren't yet commonplace 
in China.

"At informal online currency marketplaces, thousands of users helped 
turn the QQ coins back into cash by selling them at a discount that 
varies based on the laws of supply and demand."

"The rapid rise of the QQ coin has caused angst for the government 
in China, where circulation and trade of the real currency is 
strictly controlled."

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  Wayne Homren, Editor

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