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A Chinese Virtual Currency Challenges the Yuan 183

Posted by Zonk
from the now-buying-oil-in-wow-gold-thanks dept.
Radon360 writes "A Wall Street Journal article reports 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. In recent weeks, the QQ coin's real-world value has risen as much as 70%. 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."
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A Chinese Virtual Currency Challenges the Yuan

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  • by jshepher (50026) on Friday March 30, 2007 @01:19PM (#18545629) Homepage
    Canada has 2 official currencies - the dollar/loonie and Canadian Tire money.
    • by zappepcs (820751) on Friday March 30, 2007 @01:43PM (#18546015) Journal
      Not sure why you got modded as Offtopic? As pointed out, all currency is basically virtual. If Canadian Tire opened a SecondLife store maybe you would have been modded up? I know a kid that bought his bicycle with Canadian Tire Dollars.

      It is fact that in the U.S. just about anyone can print currency as long as it's in Dollar denominations and $1 of your dollars is valued/redeemed at $1 USD. The fact that the Federal version of the Dollar is the one most widely accepted doesn't mean that another currency can't be valuable.

      I wonder what US courts will decide when it comes down to treating virtual currency in regard to actual currency. Should you be able to buy $200 worth of virtual currency for $20 USD? Or will it have to have a redemption value ratio of 1:1?

      This is obviously not the case in China.
      • Re: (Score:3, Interesting)

        by Hemogoblin (982564)
        Well, if the currency was like any other "real" currency, the government would just use the exchange rate available on the currency market. The problem is that virtual currencies such as the QQ dollar are NOT traded on a currency market, and never will be. The Chinese government will never allow the QQ dollar to coexist peacefully with the yuan, since that would result in loss of control over the yuan. Since the virtual currency will never be traded on an open market, its impossible to value your assets cor
        • by AoT (107216)
          The problem is that virtual currencies such as the QQ dollar are NOT traded on a currency market, and never will be.

          to say that virtual currencies are not and will never be traded on a currency market is wrong. The point of the article is that informal currency markets sprung up to deal with the QQ. More than that, I find it very unlikely that there will *never* be a virtual currency traded on some sort of official currency market, it seems a bit of a naive assumption that things will remain as they are.
          • by Znork (31774)
            "I find it very unlikely that there will *never* be a virtual currency traded..."

            If the currency is unregulated; ie, no scarcity and unlimited printing, it's essentially a pyramid scheme. It wont be redeemed, and whoever is stuck with the assets in the end have the value of what they can sell the screenshot of their balance for...

            If the currency is regulated, ie, central bank, regulated rates, fixed availability based on incoming and outgoing goods, funds and services, sure, but then it's a real actual curr
            • by AoT (107216)
              I think you misunderstand what is meant by a virtual currency. It means a currency which has no physical counterpart, only online, not a currency which is unregulated.
              • by nasch (598556)
                I think regulation is a much more fundamental difference between the two types of currency. Whether I have physical pieces of paper or just numbers in a bank account, they're still the same dollars. And if I were told I was no longer allowed to exchange my numbers for pieces of paper, it would make very little difference in my life. Especially if the office vending machine started taking ATM cards. The big difference between dollars and QQ or WoW gold (IMO) is that one is issued by a government, and the
        • Re: (Score:3, Insightful)

          by rainman_bc (735332)
          The problem is that virtual currencies such as the QQ dollar are NOT traded on a currency market, and never will be.

          Just to point out that the QQ dollar is worth what people will pay for it. Big deal if it isn't officially traded - the market is there and it's already being traded.

          Since the virtual currency will never be traded on an open market, its impossible to value your assets correctly

          Not true - it may trade at a discount because it's traded in a subordinate market, but that doesn't mean it's imposs
  • by cyborg_zx (893396) on Friday March 30, 2007 @01:19PM (#18545631)
    I wonder how long before we see future's markets in virtual worlds...
    • Re: (Score:2, Interesting)

      by houjenming (698025)

      If it's going to happen somewhere, it's going to be in the places where the government is having trouble keeping up with what's going online. China is the perfect place. With all the "internet addiction" hospitals, it's clear that the powers that be aren't able to address/get their minds around what the citizens are doing online. Soon enough, a critical mass of people will have so much invested in what theyr'e doing in virtual worlds, that the gov't will have no choice but to adapt to the people... or ju

  • tap the vein (Score:3, Insightful)

    by bigwavejas (678602) on Friday March 30, 2007 @01:19PM (#18545635) Journal
    converting real money to virtual money is a huge business. look at all the people spending $100 dollars for some World of Warcraft gold for their level 70 mount or whatever. there's a fine line between hobby and sickness.
    • Re:tap the vein (Score:5, Interesting)

      by danpsmith (922127) on Friday March 30, 2007 @01:51PM (#18546133)

      converting real money to virtual money is a huge business. look at all the people spending $100 dollars for some World of Warcraft gold for their level 70 mount or whatever. there's a fine line between hobby and sickness.

      What's hilarious is that after you buy it, it's still in the game which actually makes it property of Blizzard, residing on their servers. Wouldn't it be an interesting world if this took off and you don't even own your own money anymore, and essentially have to use "disney dollars" for purchases. A nice way to go back to the Erie Canal model. I'm not saying this is what's happening, but it's an interesting concept.

    • by alexgieg (948359)
      You're underestimating this. A level 70 epic mount goes for 5000 gold. At $15 per 100 gold, that means as much as $750.
  • Someday... (Score:5, Funny)

    by SlashDev (627697) on Friday March 30, 2007 @01:20PM (#18545643) Homepage
    ... we will all be in debt to the Chinese, the virtual Chinese that is...
  • Obilg. (Score:4, Funny)

    by otacon (445694) on Friday March 30, 2007 @01:23PM (#18545705)
    In communist China currency.....oh wait.
  • In a sense... (Score:5, Insightful)

    by mycroft822 (822167) on Friday March 30, 2007 @01:24PM (#18545711)
    Aren't all currencies virtual anyway? Does it matter that one can be printed on paper and one can't? I know there is more to it than just that, but as long as people deem it as valuable does it matter?
    • by blackicye (760472)
      Well in Japan they have (or used to have) Yen and Pachinko balls.
    • Re: (Score:3, Informative)

      Most currency has FIAT value, meaning its value is based upon what people can purchase for it, rather than intrinsic value. In the case of US dollars, a dollar can buy a certain amount of products or services and the FIAT value is what is generally agreed upon by both parties. The dollar has no "real" value or its real value is less than the FIAT value. The piece of paper that represents the value of the dollar is not worth what the paper represents in FIAT.

      Virtual Value is very similar, but in the case of
      • Most currency has FIAT value, meaning its value is based upon what people can purchase for it, rather than intrinsic value

        No currency has intrinsic value; when it does, it ceases being currency and instead becomes a commodity (rare coins, gold pieces, etc).

        The distinction is that FIAT currency has standard values based upon real products/services

        Not so. There is no distinction, other than whether you can physically hold it in your hand. These "standard values" you are talking about don't exist -- it's t

      • by nasch (598556)

        Virtual Value is very similar, but in the case of the QQ it is a currency that itself doesn't really exist, as there are no coins or bills that exist in reality.

        I already replied to someone else along the same vein, but what the heck. US banks don't have to have physical money to back up 100% of their deposits. The Fed sets a fraction of reserves that they must hold. So this means there's more money in the US economy than paper and coins to represent it. So would you say some of that money exists (be

    • If virtual currency was backed by a government, it would be currency. But backing by a company, is different and as pointed out by the other responses to your post, inherently more risky.

      In many ways I only deal with virtual currency by using my debit card. Virtual in the sense that I never actually saw that amount of federal reserve notes. However, I will not, ever use any virtual currency that is not backed by a real government with a sound monetary policy.
      • by HiThere (15173)
        Why inherently more risky? Every government of which I've seen pertinant record has debased it's currency. (Except [for a short period in?] Dynastic Egypt, where the currency was the labor of the peasants. That one was self-debasing, to the extent that they dared.)
      • by fm6 (162816)
        Uhm, no. Currency was originally invented by banks, not governments. Currency started out as receipts for coinage that people had on deposit. That might seem like a formula for a stable currency (you take a dollar bill to the bank that issued it, and they give you a silver dollar), but it was just the opposite: the value of currency varied depending on the reputation of the bank and the difficulty of taking it back to the bank to be redeemed. Not having a a standard currency is bad for commerce, so governme
    • by The_Rook (136658)
      try to think of money like this...

      money, fiat or specie, is pretty much worthless without goods to trade. one example i could give was the late roman empire - with so few goods and services being produced, money (which was already debased coinage) was of little use to anyone and roman tax collectors preferred to collect taxes in kind - as grain, meat, or whatever goods and services they could squeeze out of the peasantry.

      in fact, real wealth in economic terms is land, labor, and capital (or at least the abi
  • Virtual coin.

    Virtual game.

    QQ coin. [urbandictionary.com]

    It's perfect for those chinese gold farmers.
    • by Otter (3800)
      Heh, I liked (from your link):

      The original name of QQ was OICQ (Open ICQ) when it was initially developed by Tencent Inc. in February 1999. However, because of the possible trademark infringement with another popular instant messenger (ICQ), and also the fact that neither the program nor the protocol is considered "open", Tencent changed its name to QQ.
      Yeah, I can see where that might possibly be considered infringement...
    • by sammy baby (14909)
      And here I thought it had something to do with Quatloos [wikipedia.org]...
  • The Chinese are selling virtual magical swords? Is their internet more free with their "Great Firewall of China" or is the article a little out of date [slashdot.org]?
  • by Max Romantschuk (132276) <max@romantschuk.fi> on Friday March 30, 2007 @01:29PM (#18545785) Homepage
    Currency is just an agreement on a medium to symbolize value. A coin or a bill is just a piece of paper or metal, just as bits on a server are equally mundane until someone agrees they mean something more.

    So, except for the legislative issues, is there really a fundamental difference?
    • by daeg (828071)
      Except when the company goes out of business, or starts adjusting the value of the money themselves for capital gain, or is hacked, or is ruled illegal, etc. I don't trust governments to handle money very efficiently, I expect even less of corporations.

      Almost no corporations are built to benefit the people, they are built to benefit the managers and owners.

      Someone, at some point, will get greedy.
      • Re: (Score:3, Insightful)

        by Xzzy (111297)
        And it'll probably be a developer who's got some unmonitored access to the database and update privileges.

        Difference between MMO money and real world money is that there is nothing physical backing the MMO money. I admit, one could argue real world money is poorly backed itself, but at least they got some amount of gold stashed away somewhere.

        Virtual money though? It's nothing but a mysql column.
        • by sholden (12227)
          There's nothing backing your real world money either. And unless it's cash stashed under your mattress or in your wallet then it too is just a mysql column...

        • by alexgieg (948359)
          Unfortunately real world money is NOT backed by gold stashed away somewhere. This was the case until 30 years ago, then that was abandoned. Nowadays no country backs their money with anything. Or, rather, they back their own currencies on US dollars, which are backed by nothing.
        • by mattkime (8466)
          >>Virtual money though? It's nothing but a mysql column. ..and how do you think that differs from your checking and savings accounts?
        • Actually there IS something backing MMO money. It's the fact that you can't get a bot or developers to do all this for you for a fraction of the price. Call it a "good faith" in the process of obtaining MMO stuff. As long as there's a faith in the stability of the process the price will be stable. As soon some developer starts adding more cash for real cash it will drop the MMO gold will be worthless since nobody will want to obtain something so cheaply gotten(X hours in office vs Y hours on computer).

          It's
    • by Colin Smith (2679) on Friday March 30, 2007 @01:45PM (#18546043)

      Currency is just an agreement on a medium to symbolize value.
      Common misconception, but one which governments are happy to foster. Actually, currency is a commodity in exactly the same way as coffee, bread, oil, gold, pork bellies.

      You see if currency were really a medium which symbolised value, it wouldn't change much. Bread, coffee, gold etc would pretty much always cost the same, they would always have the same value throughout time. Instead what happens is that over time, everything becomes more expensive, inflation. What's happening is that the currency is losing it's value. It does that because there's more of it; supply and demand. When the government('s bankers) print money, all the existing money in circulation decreases in value because there is more of it around.

      So, no, there's no fundamental difference between real and virtual money, just as there's no fundamental difference between real money and a kg of coffee.
       
      • by bigdavex (155746)

        Actually, currency is a commodity in exactly the same way as coffee, bread, oil, gold, pork bellies.

        Actual stuff is different than money. If I am marooned on an island, I can eat bread. The money is useless.

        What does "commodity" mean to you here? I understand that there's a market for money and there's a market for money, both of which are affected by supply and demand.

        Why can't there be a market for a "medium to symbolize value"? What property of a commodity makes this wrong?

        • by Colin Smith (2679) on Friday March 30, 2007 @02:11PM (#18546517)

          If I am marooned on an island, I can eat bread. The money is useless.
          Cobalt is a commodity, how much use would that be marooned on an island?

          The intrinsic value of money is it's market value, which is why people get so confused over it's nature. It's still a commodity.

           
          • by bigdavex (155746)
            Let me try to ask this more clearly.

            What is it about being a commodity implies money cannot be a medium to symbolize value?

            As you've discussed, printing more more doesn't create value. Creating more coffee does create value. So in some way these items are in different categories of items. One of them is *stuff and the other is stuff.

            I'm arguing, but I'm doing so in an effort to understand your point.
            • Re: (Score:3, Insightful)

              by Colin Smith (2679)

              What is it about being a commodity implies money cannot be a medium to symbolize value?

              OK... It can symbolize anything you want it to. It can symbolize good/evil/philanthropy or whatever, you can make anything a symbol of anything but that's meaning which you are applying to it, it isn't meaning which is inherent in it's nature.

              Money isn't inherently a symbol of value, the symbolisation of it in that way is something people add, and are encouraged to add by governments and banks. It's basic nature is that of a commodity; If everyone has a million dollars, then a million dollars is worthless.

              • by nasch (598556)

                Money isn't inherently a symbol of value, the symbolisation of it in that way is something people add, and are encouraged to add by governments and banks. It's basic nature is that of a commodity;

                I have a feeling you cannot be convinced, but I'll give it a shot. The nature of currency is its representation of value. Money is nothing else but that. What reason can you assign to valuing money other than as a means of purchasing goods or services? It has no intrinsic value - its only use is to exchange it

      • by glwtta (532858)
        So, no, there's no fundamental difference between real and virtual money, just as there's no fundamental difference between real money and a kg of coffee.

        That's just plain stupid. Coffee has intrinsic value, money does not. Just because the "value" of money fluctuates, does not make money a commodity.

        A currency is only as strong as the government that issued it. When the government that printed your money collapses, it instantly loses all its value and becomes paper again. It makes sense that nowa
        • by Colin Smith (2679) on Friday March 30, 2007 @02:26PM (#18546815)

          That's just plain stupid. Coffee has intrinsic value, money does not. Just because the "value" of money fluctuates, does not make money a commodity.
          It isn't stupid, it's the nature of money. The intrinsic value of money is it's market value, as the intrinsic value of coffee is it's flavour and high caffeine content.

          A currency is only as strong as the government that issued it.
          Nope... I live in Scotland, we have several notes, issued by private banks (not the government) which are accepted as currency, nobody even thinks about it.

          http://www.rampantscotland.com/know/blknow_money.h tm [rampantscotland.com]
          http://en.wikipedia.org/wiki/Banknotes_of_the_poun d_sterling#Scotland [wikipedia.org]

          Have a read:
          http://www.mises.org/money.asp [mises.org]

          Originally almost all money was privately issued, governments acquired the process because it allows them to create and spend money without having to tax the populace. Doing so devalues the existing currency and so is a subtle form of taxation. You've been taken in by your local government's propaganda over the nature of money.

           
          • Re: (Score:3, Interesting)

            by glwtta (532858)
            It isn't stupid, it's the nature of money. The intrinsic value of money is it's market value, as the intrinsic value of coffee is it's flavour and high caffeine content.

            The "market value" of a bank note only exist because you have a reasonable certainty that someone will accept it at that value (usually a government provides that certainty). The intrinsic value of a bank note is the amount of paper and ink needed to produce it - usually much lower than the market value. I didn't say that only governmen
            • by Colin Smith (2679)

              The "market value" of a bank note only exist because you have a reasonable certainty that someone will accept it at that value (usually a government provides that certainty)

              You think they do? I suspect that government is largely irrelevant to the maintenance of the value of a currency, perhaps even counter productive. Other than limiting the amounts they print, which anyone is capable of doing.

              he intrinsic value of a bank note is the amount of paper and ink needed to produce it - usually much lower than the market value.

              Ok, I know I should have used utility. There's really no such thing as intrinsic value.

              I'm not sure what you are arguing. How does my understanding of economics allow the government to profit from my deception?

              http://en.wikipedia.org/wiki/Seniorage [wikipedia.org]

              • by glwtta (532858)
                I suspect that government is largely irrelevant to the maintenance of the value of a currency, perhaps even counter productive.

                Interesting. Brings me back to my question about the value of a Czechoslovakian crown (or a deutschmark, or a French franc, for that matter).

                Ok, I know I should have used utility. There's really no such thing as intrinsic value.

                Yes, there is. You can boil your 1 kg of coffee and then drink it; it has value, and in that it's different from money. Are you freaking kidding
          • by AK Marc (707885)
            It isn't stupid, it's the nature of money. The intrinsic value of money is it's market value, as the intrinsic value of coffee is it's flavour and high caffeine content.

            You are asserting that the value of money is its value. That is a circular argument. It has value because we assign it value. Yes, its value is its value, but that value is arbitrary and not intrinsic. If it were intrinsic, you wouldn't have to resort to a circular argument.
            • by Colin Smith (2679)

              You are asserting that the value of money is its value. That is a circular argument. It has value because we assign it value. Yes, its value is its value, but that value is arbitrary and not intrinsic. If it were intrinsic, you wouldn't have to resort to a circular argument.

              Yes ok, I should have said that the utility of money is it's market value. There's no such thing as intrinsic value. And no, we don't assign it value. It gets it's value from the supply/demand, in the same way as any commodity.

              The value of money isn't arbitrary. If it were, then you could say a loaf of bread is 1 dollar, and it would stay one dollar until the end of time, or until the government decided to give bakers a raise and say it cost 2 dollars. Not the case. 1 dollar today will buy you 1/20th of wh

              • by AK Marc (707885)
                And no, we don't assign it value.

                Odd, when I go to the store, they have items marked on the shelf at $2.00. I presume this means they assigned the value to the dollar of 1/2 the item. Yes, it is more common to think of it the opposite way for how things are valued, but it is the backwards valuation that causes the confusion. The value of the dollar is assigned for each and every transaction. If you watch a car salesman through the day, buyers assign different values all the time. Some think of their
                • by Colin Smith (2679)

                  Odd, when I go to the store, they have items marked on the shelf at $2.00. I presume this means they assigned the value to the dollar of 1/2 the item.

                  Sure they attempt to give the item that value, but if you don't buy it, then it doesn't have that value for you. If you don't buy the item then the dollar is worth more than half the item and the item is worth less than 2 dollars. This is why you can't assign the value of a dollar. The value is different for each and every person.

                  ok reading the rest of your post I think we're arguing over the scope. I'm not talking about individuals assigning a value I'm talking collectively.

      • by danpsmith (922127)

        So, no, there's no fundamental difference between real and virtual money, just as there's no fundamental difference between real money and a kg of coffee.

        I've got a difference for you, I can have real money stuffed under my mattress. However, where exactly can I put virtual money? (I know I set myself up). But it is true, think about it. If all money becomes virtual, then only selected "trusted" servers will be able to deal in it. How are you going to be able to even have your own personal stash of mo

  • The United States has been running big trade and budget deficits for a while now, supported for a large part by Chinese investors and the Chinese Central Bank buying American stocks and bonds. And I think the consensus amongst economists (and, for that matter, simple logic) is that this can't go on forever, and that eventually the Chinese are going to want to invest their money elsewhere.

    So, what would be even more embarrassing then our economy hitting a brick wall because the Chinese are pulling all their
  • The producers will just keep producing it and inflation will kick in. For some reason bankers just can't help themselves.

     
  • The Chinese currency is artificially valued as it is. Some speculate that if the value was determined by fair market rules it would decrease significantly. This being said, it is no surprise that a "fake version of money" that is worth little in real world value, is competing with it.

    It would be like saying every 1 US dollar is now worth 2 US dollars and then gaging the growth of the EU currency as a sign of how stable and capable the EU is when their currency adapts to this force. When If they were all val
    • by z4ce (67861)
      Umm.. no.. actually relative to the US Dollar if it wasn't artifically deflated the currency would skyrocket. That's why they have nearly a trillion dollars in U.S. Government debt. They are trying to make the US Dollar stronger and their own currency weaker. Why do they want to do that? Because a weaker currency means your exports are cheaper.

      Personally I think its a very poor currency policy, but there you have it.
      • by sumdumass (711423)
        It's the same effect. Whether their currency is higher or lower, it has the same effects on artificially valued currency it move disproportionately in one way or the other or even both.

        But yea, I see the point now, It is undervalued instead of overvalued when comparing it to real world real attributes.
    • I'm not an economist, but it seems to me that these effects would only appear if the fake money was traded freely between currencies. Since the virtual currency is only used in China and is linked only to the yuan, would the real-fake effect you describe show up?
      • by sumdumass (711423)
        Sure it would. And it is more likely to appear in this situation then if it would compared with others. But I'm not an economist either but all the ones I do see are contradicting each other anyways. So I'm not sure they would have "the" right answer anymore then we would.

        But with the comparison being limited to a single item, it has even more effect compared to that item. Now, if the yuan was worth more then it is going for, then it makes sense that a virtual currency finding it's real value reaches that a
  • One of the most powerful levers of economic control that governments have is the power to manipulate exchange rates. While some countries have moved to a free floating rate for their currencies, others still try to mandate exchange rates and enforce these rates by prohibiting the cross-national transport of large sums of currency. This alternative currency (and others like it) could really upset China's plans to manipulate the value of the Yuan (particularly keeping it artificially low) because if e-curre

  • The real issue with this will come when there's a big scandal about terrorists (or drug smugglers) using a game to transfer large sums of money.
  • Isn't anyone worried about a virtual currency that is named "QQ"?

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