China cracks down on Gold Farming

It’s official.  The Chinese government has now outlawed trading virtual currency for real world goods and/or services.  In this joint statement released by the Ministry of Culture and Ministry of Commerce, the government clearly defines virtual currency, including ‘prepaid cards of cyber-games’.

“The virtual currency, which is converted into real money at a certain exchange rate, will only be allowed to trade in virtual goods and services provided by its issuer, not real goods and services,” the Ministries said.

The process of exchanging real world goods, services, or currency for in-game virtual currencies in MMORPG (Massive Multiplayer Online Role Playing Games) is often referred to Gold Farming, and has afflicted a number of titles including the perhaps most popular example, the worldwide hit World of Warcraft.

The Chinese government has estimated the virtual currency trade at over several billion Yuan last year.  To put that in perspective, 1 billion Yuan is roughly $146 million USD.  The government also claims that the practice has been gaining popularity, and has an annual growth rate of about 20%.  With over 300 million internet users, China has the largest online population in the world.  This new ruling is likely to affect many of these users, as well as other countries involved in virtual currency trading, a number of whom rely on, or utilize in part or whole, the Chinese system.  According to a 2008 study conducted by Richard Heeks at the University of Manchester, the virtual currency trade employs hundreds of thousands of people around the world, 80-85 percent based in China, and generates between $200 million and $1 billion annually.  Well, at least the Chinese governments in the right ballpark with their numbers.

One of China’s most popular online destinations, Tencent.com, with approximately 220 million users, about the same as facebook, is quoted in the release as “resolutely” supporting the new measures (well of course…what else are they supposed to say?).  Given Tencent’s sheer size and numbers, their virtual currency “QQ Coins”, is one of the most popular forms of virtual currency in China.  They also added that they are strongly opposed to the black market trading of virtual currencies, as they may be used to enable online theft and fraud.

According to the release, using virtual money for gambling will by punished by public security authorities, and minors may not purchase virtual money.

Whoa.  Let’s reiterate that: Minors may not purchase virtual money.

According to a report in the English version of China Daily (sorry, I can barely speak English, much less Chinese), in-game items and gear are NOT considered virtual currency, so this format may or may not be allowed to continue.  But for now, it’s all in the hands of Chinese government officials.