2007: Year of the virtual economy?

The VERN blog has been quiet this month. Rest assured that the reason is not that we have been inactive, but that we have been busy working. In January I hope to have a little announcement to make.

Meanwhile, Steven Davis at PlayNoEvil has posted three excellent articles on virtual economies and plans to regulate them in the Far East. The first one is a Xinhua report on how virtual Q(Q) Coins are increasingly being accepted as a viable currency by Chinese businesses and how the goverment is reacting to this. The second one refers to a Korea Times story providing new details on Korean lawmakers’ plans to restrict RMT. The latest Xinhua article discusses Chinese Ministry of Culture’s regulatory ambitions over RMT.

Does regulation mean the party is over? Will governments step in and sever the links between real and virtual economies? Will games and community services go back to being “entertainment and relaxation, and nothing else”, as one Chinese MOC official puts it?

While lobbying their government to ban RMT, Korean game companies are themselves increasingly adopting “item payment” revenue models. Some community services like Cyworld have had their virtual economies rooted in real money for some time. Assistant manager Oh-Tae Kwon at the government’s Korea Game Development & Promotion Institute (KGDI) told me this summer that it is only the third-party RMT businesses operating without a service operator’s permit that the industry wishes to curb. Sanctioned RMT will most likely increase.

In China, where virtual currency is being used as a payment method for various real-world goods and services as well as virtual ones, one of the discussions is whether intermediators (RMT businesses such as “Q Banks”) should maintain cash reserves in the same way as banks do.

Instead of destroying the market, succesful regulation should help business based on the value of virtual property to thrive, by providing it with a level of legal certainty in exchange for restrictions. This will allow reputable companies to enter the market that has so far been dominated by various gray-area operations willing to take risks and go against EULAs. KGDI estimates that the RMT market was 1 Bn USD last year in Korea alone. 2007 might turn out to be the year of the virtual economy, for third-party companies in particular.