A Chinese Virtual Currency Challenges the Yuan

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."

Re:You haven't been to Canada have you

[zappepcs]

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:tap the vein

[danpsmith]

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.

Re:You haven't been to Canada have you

[Hemogoblin]

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 correctly. That will cause a problem with taxation, but I'm sure governments would prefering losing some tax revenue over losing complete control over their currency.

Re:Nope! All currency is a commodity...

[glwtta]

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 governments can issue money, just that money has no value without the backing of the issuer (that's kind of the definition of money).

You've been taken in by your local government's propaganda over the nature of money.

I'm not sure what you are arguing. How does my understanding of economics allow the government to profit from my deception? Money certainly can be issued privately, governments are usually just in a better position to do it.

Tell me, what exactly is the intrinsic value of a Czechoslovak crown?

Re:Is anyone else here thinking about Tulips?

[houjenming]

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 just outlaw everything which they're having trouble controlling... (which honestly, is one of their typical approaches).

But with the rate of adoption of online currencies (due in great part to population of young, tech-savvy people), and the inability for the "Old Dudes" to fully comprehend the dynamics of the online world, will cause them to have to adapt to current situations, instead of just manhandling the status quo to what conform to they can comprehend.

The momentum of the current situation in China leave the youth with some serious leverage (by virtue of pure numbers, and their already-existing habits), just by doing their transactions, and actually gaining what they consider to benefit -- this (in my view from living in Shanghai for 4 years) will be a force that will behoove the gov't to adapt to accommodate, instead of just using the typical heavy-handed paths of legislation.

go, kids, go! play those games! invest your money in your online games! See what they think they can do to prevent you!

In some ways... it's just another one of the repeated peasant/working class uprisings, so periodic to China.