China bans use of virtual currency for real-world products

China has outlawed the practice of trading virtual currency for real goods or services. The Chinese government claims the law is aimed at the curtailing of gambling, money laundering and other illegal online activities. Another likely reason is that the government is feeling threatened by this private currency it doesn't have under control, especially because some forms of virtual currency like QQ coins are widely used by millions of Chinese teens and adults to purchase real-world goods and services. The new legislation may also have implications for so-called gold farmers.

Virtual currency, as defined by Chinese authorities, includes "prepaid cards of cyber-games," according to a joint release issued by China's Ministry of Culture and Ministry of Commerce on Friday.

"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 Chinese government estimates that trade in virtual currency exceeded several billion yuan last year, a figure that it claims has been growing at a rate of 20% annually. One billion yuan is currently equal to about $146 million.

More info at Information Week.