Abuse of Virtual Money: To Regulate or Not to Regulate

The Chinese government has banned the exchange of virtual currency for real world goods or services.  Information Week has an article that goes into more details. 

It’s not surprising that a government is having to step in to regulate the use of virtual currency in games like World of Warcraft among others.  In talking to several companies that provide forms of virtual currency, I’ve found that there are many, many risks that come along with these types of economic systems.  Any time the bad guys can find a way to eek value out of a system, there is incentive to find a way to beat the system. 

One advantage to virtual currency, as opposed to real-world currency, is that it is less anonymous.  (Take note of this – it is extremely rare that something on the Internet is less anonymous than something in the real world!)  In the real-world if you receive stolen money it can be very difficult to track exactly where that money came from.

Online, though, there is often an audit trail that can be followed.  Even if the account that gives you the currency is, itself, stolen, there are IP addresses, cookies, etc. that may be helpful in tracking down the perpetrator.  Granted, the perpetrator is likely in some other country and hidden behind proxies and Internet cafes, but at least there is somewhere to start.

Will the Chinese government be successful at combatting the abuse of virtual currency?  It’s hard to say.  But it is likely we will see additional legislation by other countries to try to stave off the nefarious acts that can occur through virtual economies.