Tencent: Virtual Bank of China

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The Asia Times has a piece titled China’s virtual currency threatens yuan, in which is discusses the growing concern from the likes of China’s central bank over the popularity of Tencent’s QQ virtual currency and its potential effect on the value of the countr’y real world currency, the yuan.

“The QQ coin is challenging the status of the renminbi (yuan) as the only legitimate currency in China” says Yang Tao, a public prosecutor.

Tencent has over 220 million users of its instant messaging service and QQ coins can be purchased for 1 yuan per coin via bank, QQ card or telephone.  They are apparently used for everything from buying online games and software to blackmarket trading and online gambling.

The central bank is worried about a future in which the popularity of virtual money grows to the point where it jumps from virtual to real goods.

What’s the concern? China should embrace this development rather than trying to squash it. It is an inevitable and logical progression and those country’s that work it into how they operate will remain more relevant than those who don’t — nation states needs to evolve or they will increasingly become irrelevant.

As Wagner James Au saysat a fundamental level, all money is virtual. At root, its worth depends on the value a group invests in it, whether it’s made of paper, metal or binary code.

He also points out that this is the beginnings of a future international trend – all three next gen consoles – Xbox 360, Nintendo Wii and SOny PS3 – include microcurrency systems, and like the QQ, are designed for purchasing games and other products from their online networks. But with tens of millions of players who find value in these virtual currencies, what’s to stop them from using it for purchasing other goods and services from each other? And given the volatility of real money, should they be stopped?

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