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By DAVID BARBOZA


SHANGHAI — China made public on Tuesday regulations aimed at cracking down on the use of virtual currencies amid worries that a huge underground economy was developing out of the country’s online gaming community.


The rules, issued jointly by the Ministry of Commerce and the Ministry of Culture in Beijing, could deal a blow to the country’s fast-growing online gaming industry.


Beijing said the regulations would curtail trading in virtual currencies, prevent online gambling and restrict virtual currency from being exchanged for cash or used to buy real goods.


Among other things, Chinese officials have worried that online currencies could ultimately serve as an alternative to China’s official currency, the renminbi, and have an impact on the country’s financial system.


Some of China’s biggest Internet and online gaming companies were quoted in the state-controlled media Tuesday saying that they welcomed the new rules and hoped that the rules would prevent fraud in the industry.


But some companies, including Tencent and Shanda, did not return phone calls Tuesday seeking comment.


Richard Ji, an Internet analyst at Morgan Stanley, released a brief report Tuesday, saying he expected only limited financial impact on Chinese gaming companies because much of the trading in virtual currencies and goods does not occur on the sites of big, publicly listed companies; it occurs on other Web sites.


But privately, some gaming experts say they worry that if the new rules are interpreted more broadly they could disrupt the trading in online gaming credits and virtual goods, like game weapons.


China has one of the world’s biggest online gaming markets, and tens of millions of players are believed to be earning gaming credits and even trading them for cash and goods.


Last year, trading in virtual currency in China amounted to nearly $2 billion, according to the China Internet Network Information Center.


In recent years, China has even become a center for what the gaming community calls “gold farming,” whereby young Chinese are hired to spend long hours playing popular online games, like Blizzard Entertainment’s World of Warcraft, to accumulate game credits for players in other countries, including the United States.


Some small companies in China have even created what are “virtual sweatshops,” cramped rooms where young people play online games for hours to earn credits, virtual weapons and other goods that their company then sells to customers in the United States, Taiwan, South Korea and other countries.


Many online marketplaces, like eBay and China’s Taobao, even have online advertisements offering virtual goods for sale, like the gold coins of World of Warcraft and virtual QQ coins from Tencent. Some Chinese companies have grown quickly in recent years by dealing entirely in the trading of virtual goods and weapons.


In issuing the rules this week, Beijing said they were meant to cope with a growing number of problems associated with virtual currencies, including disputes over the use of virtual coins.


The government said it would closely restrict who can issue virtual currency and forbid people from taking virtual currency from one online site and selling or trading it somewhere else.


The government also defined virtual currency and said it could no longer be exchanged for real goods.


With a flurry of new Internet-related regulations in recent months, including new measures to fight online pornography and so-called unhealthy content, Beijing seems determined to maintain control over online content in China, which now has the largest Internet population with close to 300 million users.


Source: NYTimes July 1, 2009. Related: Games become jobs: Gold Farming in China, Cellphone minutes: the next currency, The Money Matrix, Millionaire in Second Life, Online gamers unmasked, WoWoW.

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3 comments

  • site}.| John Smith http://dumm1.co.uk

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  • I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often. Margaret http://racingonlinegames.net

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  • If left unrestrained, would this economy evolve the way other capitalist economies have? Are the employees at the "virtual sweatshops" paid in real or virtual money? Or what if the Chinese government adopted this economy and began to regulate it the way they regulate the physical one?

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