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A Chinese Virtual Currency Challenges the Yuan
Radon360 writes "A Wall Street Journal article reports that China's fastest-rising currency isn't the yuan. It's the QQ coin — online play money created by marketers to sell such things as virtual flowers for instant-message buddies, cellphone ringtones and magical swords for online games. In recent weeks, the QQ coin's real-world value has risen as much as 70%. It's the most extreme case of a so-called virtual currency blurring the boundaries between the online and real worlds — and challenging legal limits. A Chinese Internet company called Tencent Holdings Ltd. designed the payment system in 2002 to allow its 233 million regular registered users to shop for treats in its virtual world. Virtual currencies are in use in many countries — but nowhere have they taken root more deeply than in China."
Big money goes around the world
Big money take a cruise
Big money leave a mighty wake
Big money leave a bruise
Big money make a million dreams
Big money spin big deals
Big money make a mighty head
Big money spin big wheels
Canada has 2 official currencies - the dollar/loonie and Canadian Tire money.
I wonder how long before we see future's markets in virtual worlds...
converting real money to virtual money is a huge business. look at all the people spending $100 dollars for some World of Warcraft gold for their level 70 mount or whatever. there's a fine line between hobby and sickness.
"Simplify, simplify, simplify!" Thoreau
Sounds like a case of Gresham's Law to me.
... we will all be in debt to the Chinese, the virtual Chinese that is...
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In Azeroth China, though, there is a constant cry for "Less QQ" and a call for the rise of "pew pew"
In communist China currency.....oh wait.
In a world of acronyms, the words are the real victims.
Aren't all currencies virtual anyway? Does it matter that one can be printed on paper and one can't? I know there is more to it than just that, but as long as people deem it as valuable does it matter?
How long until the Chinese Gov't takes control of this and artificially inflates its value, just like the Yuan and the Chinese stock markets?
How is this any different from any other government controlled currency? It's not like the USD isn't inflated being that it's not backed in tangible anything.
Virtual coin.
Virtual game.
QQ coin.
It's perfect for those chinese gold farmers.
You have it backwards. Many experts believe the yuan is undervalued, which allows Chinese manufacturers to sell their goods at low prices.
I think your comment on the stock markets is just a troll, but they're not overvalued either. The Chinese market is one of the fastest growing markets in the world.
The Chinese are selling virtual magical swords? Is their internet more free with their "Great Firewall of China" or is the article a little out of date?
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Currency is just an agreement on a medium to symbolize value. A coin or a bill is just a piece of paper or metal, just as bits on a server are equally mundane until someone agrees they mean something more.
So, except for the legislative issues, is there really a fundamental difference?
.: Max Romantschuk
They have little intrinsic value and few are backed by anything other than government hot air.
The United States has been running big trade and budget deficits for a while now, supported for a large part by Chinese investors and the Chinese Central Bank buying American stocks and bonds. And I think the consensus amongst economists (and, for that matter, simple logic) is that this can't go on forever, and that eventually the Chinese are going to want to invest their money elsewhere.
So, what would be even more embarrassing then our economy hitting a brick wall because the Chinese are pulling all their money out, is the Chinese pulling all their money out because they want to put it into a currency that can be used to by VIRTUAL FLOWERS.
Hopefully I didn't put any [] around my words.
The producers will just keep producing it and inflation will kick in. For some reason bankers just can't help themselves.
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That is incorrect, currency has to be backed by gold.
No. It doesn't have to be.
Post World War 2, Gold standard was replaced by the Bretton
Wood Monetory system, which was also based on Gold Reserves.
However, the US (under Nixon) totally shut off gold based
currency in 1971. Very few currencies are gold backed
currently.
Read up on the Federal Reserve Bank.
If that doesn't shake your faith in US currency, nothing will.
I only look human.
My mother is a halfling and my dad is an ogre, so that makes me an Ogreling
As the article mentions (yes I did read it), there are already market-makers of a sort for the QQ currency. Essentially, they convert QQ dollars to yuan and back. Like all market-makers, I assume they charge a spread that allows them to earn a small percentage on each transaction.
Clearly, the barrier to development of this virtual currency market is that the Chinese Government (or any other government for that matter) doesn't want it. There are a few reasons, but the most obvious are loss of control, dilution of "real" currency, and inadequate backing of the currency. For example, the Chinese government has control over the supply of yuan (they print it), and back the yuan's value. QQ coins on the other hand, are only "real" in the sense that Tencent allows you buy things with them. While the Chinese government will always support the yuan, Tencent can't guarantee the QQ will always have value. If Tencent went bust, or had an employee suddenly issue billions of QQ dollars, the value of the currency would plummet.
Given the above, this currency will never be allowed to exist peacefully with the yuan. It will never be used for big business to business transactions, so we'll never see specialized markets for lending or futures.
...given that this is an online currency that nobody has mentioned yet how much QQ-ing is going to happen if it will be frozen/removed...
You see if currency were really a medium which symbolised value, it wouldn't change much. Bread, coffee, gold etc would pretty much always cost the same, they would always have the same value throughout time. Instead what happens is that over time, everything becomes more expensive, inflation. What's happening is that the currency is losing it's value. It does that because there's more of it; supply and demand. When the government('s bankers) print money, all the existing money in circulation decreases in value because there is more of it around.
So, no, there's no fundamental difference between real and virtual money, just as there's no fundamental difference between real money and a kg of coffee.
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If the Chinese Gov. stopped investing their massive trade surplus in US Gov. bonds, the Yun would come under even stronger pressure (to rise against the $)and the US economy would implode. Nobody wants this, especially the Chinese, since their major export market would promptly evaporate. The US wants cheap imports, (a major factor in recent inflation-free improvements in standards of living) and China wants the increase in wealth that the conversion from an agricultural to industrial economy brings. Everybody knows the whole thing is going to end in tears, but in the meantime... On another note, the largest 'virtual' curency in circulation is not this stuff, it's airmiles. The Economist reported (in 2005 - later figures anyone?) unredeemed airmiles amounting to over $ 700'000'000'000...
I'm going to watch and wait until Inter Stellar Kredits are a worldwide accepted currency. When that day comes, I will be a rich, rich man.
The Chinese currency is artificially valued as it is. Some speculate that if the value was determined by fair market rules it would decrease significantly. This being said, it is no surprise that a "fake version of money" that is worth little in real world value, is competing with it.
It would be like saying every 1 US dollar is now worth 2 US dollars and then gaging the growth of the EU currency as a sign of how stable and capable the EU is when their currency adapts to this force. When If they were all valued in the same manor, the differences would be increasingly different and smaller and more reflective of how the country operates instead of how they want you to believe.
In the case of the Chinese online currency, it is competing in a fairly fair or open market were the Chinese real money is artificially valued. It only makes sense the value needs to adapt to the real money market when used outside this fake realm. And you will see jumps equal to the artificial value differences. This says more about how much the Chinese money is overvalued then it does about the value of virtual money.
I know with all the jumps in there, it is hard to follow. If someone can clean this up to be easier to understand then please do. The problem i believe, revolves around the real money having fake attributes to it which leads to a fake money with real attribute performing better when competing together.
Could it possibly be true that there are 233 million registered users with this company? That is roughly 1/2 of China's non-rural population (estimated at 40% of 1.3B)... roughly 1/4 of the entire internet (estimated at 1.1B)... approximately 4% of the earth's pupulation (roughly 6B)... is it a little creepy to anyone else that one company has the financial information of this many people? Can that number really be correct?
Gold has intrinsic scarcity. Paper doesn't. BTW, the US government have printed, 8 trillion dollars worth of paper which is currently being held off the market by national reserves.
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In the US our money is no longer tied to any sort of commodity like gold, our currency is tied to ENFORCEMENT. If you want to keep liquid assets safe be sure to use the standard of the biggest military around. History shows that countries that try to tie their currency to some sort of natural resource like coal or oil just end up get invaded. I am not saying this is justified but is rather a matter of fact. The private ownership of land and resources or even fertile young ladies will always stand in second place to firepower. If you want to play it safe be sure you deal with the devil. Guns have a way of guaranteeing that the almighty dollar is accepted at any bank in the world.
ANY item of intrinsic scarcity can become a means of exchange then. If I roll up the Mona Lisa and sell it, that art has intrinsic scarcity.
We could make currency out of anything from jewelry to beanie babies, and it could be just as easy a standard as gold with the right belief behind it.
If you can hoard it, if it's rare, and if it's a means of exchange, it's currency. That's all there is to it.
All currency is virtual. I see no point in making any distinctions.
Grain, I can eat; currency, I cannot. That is all that matters.
If virtual currency was backed by a government, it would be currency. But backing by a company, is different and as pointed out by the other responses to your post, inherently more risky.
In many ways I only deal with virtual currency by using my debit card. Virtual in the sense that I never actually saw that amount of federal reserve notes. However, I will not, ever use any virtual currency that is not backed by a real government with a sound monetary policy.
Well.. maybe. Or Maybe not. But Definitely not sort of.
declare there can be only Yuan.
One of the most powerful levers of economic control that governments have is the power to manipulate exchange rates. While some countries have moved to a free floating rate for their currencies, others still try to mandate exchange rates and enforce these rates by prohibiting the cross-national transport of large sums of currency. This alternative currency (and others like it) could really upset China's plans to manipulate the value of the Yuan (particularly keeping it artificially low) because if e-currencies like thjis become cross-national, then one could simply convert (under-valued) yuan into e-currency, convert e-currency into dollars or Euros, and then convert the hard currency back into Yuan for a tidy profit.
Now this obviously relies on certain things lining up correctly, but it is more difficult to stop than cross-border currency transfers. The key to undermining government control over exchange reates is having an e-currency that people all over the industrialized world value. We aren't there yet, but we might get somehting like it within a few years. That will certainly alter US-China relations, since one of our major gripes is the artificially low value of the Yuan.
Make cheese not war 8:)
Actually there IS something backing MMO money. It's the fact that you can't get a bot or developers to do all this for you for a fraction of the price. Call it a "good faith" in the process of obtaining MMO stuff. As long as there's a faith in the stability of the process the price will be stable. As soon some developer starts adding more cash for real cash it will drop the MMO gold will be worthless since nobody will want to obtain something so cheaply gotten(X hours in office vs Y hours on computer).
It's not that different in the real world actually. If we find out that someone has been printing lots and lots of money--inflation. Reminder for inflation: currency value sinks. Your money now is worth less than a minute ago. Real money? It's just a number of bills in circulation. But nowadays it is also not much more than a number in a database.
As for gold backing...it didn't work out so well. If you don't remember, Johnson was printing money like a madman to fund a war(hmm sounds familiar). Don't want to ruin the story, but it happens that when you have the gold standard you can't just print more money than you have gold or people will make a run on the gold(once they find out) and all your wealth goes poof!
So what backs the dollar now? Good question. The answer: Oil. You can only buy oil in dollars at 2 stock exchanges, one in Britain one in US. If you want to buy oil you need lots and lots of money in reserve at your bank. That's why you haven't seen that much inflation even though oil price is up. All the foreign banks keep needing to have large amounts of dollars at hand so people can use them to buy oil. It's all pretty funny actually. If you really think about it, inflation is a sort of tax. Every time someone holds dollars and the Fed prints more money it goes down in value. That difference is what the Fed pockets as a sort of gimmie tax for printing more money. So relax, there really is something backing the dollar. Just hope it doesn't go poof!
"You're everywhere. You're omnivorous."
That's Tencent, not to be confused with 50 cent.
I find it interesting that people talk about WoW gold, L$, and other 'fake' currencies as some kind of novelty. I think they are more significant than that.
Money itself is a commodity with a price. We always hear governments talking about 'free' and 'open' markets - but just try to introduce a private-label currency and see how far you get. If currency markets were truly free, consumers would decide which currency mattered most, and government would not limit their choices to an 'official' national one.
We keep hearing about government schemes to tax 'virtual' income. It's not so much that politicians are greedy (though they certainly are), more that they see virtual currency as a coming threat to government monopoly on the money market.
I recommend that everyone take the time to read http://www.mises.org/money/2s7.asp
Basically banks are allowed to lend out more money than is entrusted to them ... this creates a feedback loop.
The real issue with this will come when there's a big scandal about terrorists (or drug smugglers) using a game to transfer large sums of money.
Isn't anyone worried about a virtual currency that is named "QQ"?
Deep in the ocean are treasures beyond compare; but if you seek safety, it is on the shore.
http://news.sina.com.cn/o/2007-03-22/163311472689s .shtml
If you find an English version of this news, suggest post it to slashdot.org. Here is my brief summary:Then as usually happen in China, people will do the opposite of what the government intends to do. There will be black market arise immediately.
also this hype may also be related to recent franzy in the Chinese stock market which are hitting new high every other day (after dropping 9% earlier in March.)
I read a whole bunch of posts and not one person has actually tried to exchange the regular Chinese Yuan.
It's not convertible either, you need to prove that you bought it legally (with real currency, like USDs, GBPs or EURs) or if you earned it, you can only convert a fraction provided you have every piece of paper related to getting paid in China (you don't -- no-one does).
In reality you just convert it illegally at the liquor store or the fake-watches market (huge multi-thousand USD transactions happen in the open in a market, it's so weird, the guards carry lead pipes). You get great rates (less than 1% -- which is awesome considering it's an illegal transaction).
But the point is the gov't doesn't want an exchange of Yuan either.
Cambodian money is even funnier -- I tried to exchange it in Vietnam and the guy was surprised to find out that there was Cambodian currency.
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If I can buy a sword or flowers or a horse from you in WoW dollars or QQ dollars or Linden dollars I can just as easily buy your ebay transaction, if you'll agree. I could also offer you a stick or a piece of fruit. It's a voluntary exchange. All thats necessary for 2 people to want to exchange via something other than their own "default" currency is a the ability to retain value, i.e. a stable exchange rate. A few virtual currencies are headed in that direction (most notably / obviously the Linden). If it somehow became illegal to buy and sell "real world goods" with "fake" currency (I don't see how this would be enforced. Barter is legal), you could still sell me a "wooden shield (nudge,nudge,wink,wink)" for 50k Lindens and nobody would be the wiser. Personally, I believe that distributed virtual currencies are inevitable. Black markets will love them. The technologies necessary are slowly appearing. All thats needed is someone to guarantee the value. Ebay or Paypal could do this, but it'd piss off the US. Gambling sites would probably love the idea; it'd take Visa/MC (and their fees, and informing the IRS) completely out of the equation. Eventually someone somewhere in the world will do this, and we will have the choice to deal in alternative currencies. Hell, I bet the Pirate Bay could start issuing cryptographically signed tokens, and SOME people would play along. This would make tax collection Very Difficult without the cooperation of the issuer.
Is that the Chinese are free ONLY to buy virtual magic swords online. As soon as you want to talk about, say, having an election, you're cut off by the authorities, who use real swords.
It doesn't take much to rise faster than the Chinese Yuan - the Yuan is artificially pegged to the value of the dollar, and really doesn't go anywhere at all. The reason the Chinese do this is it keeps the Yuan weak, and thus, their exports cheap - especially in the US, where most of their exported goods go. This has allowed China's economy to grow an astonishing amount (5-10% annually) in the past couple of decades. Sometimes it helps to have weak currency.
I suppose that, like most things, that depends on if you read up on it in textbooks or random sites on the Internet.
An interesting anagram of "BANACH TARSKI" is "BANACH TARSKI BANACH TARSKI"
a moron suddenly realized what all this fuss over China was about.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."