New virtual currency in China

China Cracks Down On Virtual Currencies
Shu-Ching Jean Chen, 03.06.07, 10:25 PM ET

HONG KONG -

Worried that virtual currencies from online games could undermine the country’s financial system, Beijing has taken steps to restrict their conversion into yuan and use to buy real goods, and banned the opening of new Internet cafés.

Beijing is struggling to rein in the hot money flushing around of the country, hoping to keep the yuan from appreciating too fast against the dollar.

The measures against virtual currencies, announced by China’s state news agency Xinhua in a joint communiqué by 14 government agencies, were said to be aimed at preventing them from wreaking havoc on the real-world economy.

Titled, “A notice about further steps in strengthening the management of Internet cafés and Internet gaming,” it says that the redemption of virtual currencies in value exceeding their original purchasing prices will be banned to prevent attempts to realize profits. It also says they cannot be used to buy real goods, only virtual products and services provided by the gaming operators who issue the currencies.

Violators would be subject to financial crimes detailed in China’s banking law.

Most of China's 137 million Internet users depend on the country’s 113,000 Internet cafés to get online. The ban on the opening on new ones will delay the spread of Internet access in China, which has the world’s second-largest number of Web surfers after the U.S., and could affect the business plans and prospects of such online companies as Google (nasdaq: GOOG - news - people ) and Yahoo! (nasdaq: YHOO - news - people )

There are at least 10 types of virtual currencies offered by Chinese Internet gaming companies, including Nasdaq-listed Shanda Interactive (nasdaq: SNDA - news - people )and Tencent (other-otc: TCEHF - news - people ), whose shares are listed in Hong Kong.

Tencent’s popular QQ Coins have been accepted as payment by other companies as well as sold for legal tender.

Some of the top Chinese gaming Web sites have recently been accused of allowing online betting, which is illegal in China.

The announcement said there would be a crackdown on online betting and that the central bank, the People’s Bank of China, will tighten oversight on virtual currencies in use in online gaming, including steps to draw a clear distinction between virtual transactions and online trade involving real goods.

The Chinese virtual currency market is believed to be growing at a yearly rate of between 15% and 20%, and is estimated to be worth several billions of dollars.

---------------------------

Coment:

Meaning, the Chinese Government is worried of the melt up of the Chinese Yuan which could apreciate as much as 200% in a very shot time. This new e-currency from qq.com can be also an oportunity for this 7 billion dollar enterprise.

http://www.qq.com/

http://www.tencent.com.hk/produc/product_e.shtml