A new report came out from China, in order to convince anyone that needed anymore proof that fiat money is inherently worthless. So if fiat money is losing it's legitimacy to virtual money imagine what will happen if we let the free market choose it's form of payment.
In The End of The Yuan Peg- China is Desperately Trying to Attract Foreign Capital in Order to Prevent a Banking Crisis We wrote:
Well, after 2 years of a constant peg and a giant housing bubble combined with a big inflation one it appears that foreign investors and the Chinese that are able to take their money where starting to loose patience.
In an article published on April 29 in China security Journal, Vice President of Shenzhen Development bank mentioned that deposits in banks were decreasing since many investors were rushing into the property market.
In a June 21 article in Hong-Kong Takung Newspaper, t
heir was a report that the major banks in China have been suffering from significant decreases of RMB deposits in the last c two months. The article also mentions that their was an even larger decrease of foreign exchange deposits.
heir was a report that the major banks in China have been suffering from significant decreases of RMB deposits in the last c two months. The article also mentions that their was an even larger decrease of foreign exchange deposits.
An older article from June 10 in China 21century economic report said confirms this news and states that new RMB deposits fell dramatically in the major Chinese banks. It also quoted one of the Chinese bank officials mentioning that it is time to let the Yuan float more freely in order to attract foreign capital.
And in the The Next Black Swan- A Yuan Devaluation we wrote:
Meanwhile, investors worldwide are making large bets that the Yuan will revalue and gain value versus the U.S dollar. Ironically, this intensifies the potential of a Yuan crash, since the presence of so much speculative funds is going to overweight China’s foreign exchange reserves. If China decides to let the Yuan float, it may go up initially but once foreign investors take the money out of the country once the revaluation has been done, the flow of capital will drain China holding of FX reserves since it will need to sell them in order to prevent a Yuan collapse.
Yesterday their was a report in Bloomberg and Businessweek:
China, the world’s biggest Internet market, said it will prohibit companies that operate platforms for online virtual-currency transactions from providing services to minors in an effort to prevent abuses.
The ban will be implemented Aug. 1, according to a Ministry of Culture statement on its website today. Online game operators that issue virtual currencies for use in their titles won’t be affected by the ban.
The Chinese government has tightened control of the Internet as the number of web users rose 29 percent last year to more than 384 million, the most of any nation. China, which prohibits pornography, gambling and content critical of the government, has blocked access to foreign websites such as that of Facebook Inc. and closed local sites.
The ban will affect platform providers including 5173.com and uu898.com.
Virtual currencies from online games in China are traded on the Internet among players and used to buy swords, armor and other items for use in titles. Individuals earn virtual currencies as they play games and can also buy the virtual currencies with yuan.
The official Xinhua News Agency reported in November 2006 that the Chinese central bank may begin supervision of virtual currencies as they could affect the value of the Yuan. The People’s Bank of China would put Q-coins issued by Tencent Holdings Ltd. under its oversight if they entered wider circulation, Xinhua reported at the time.
Virtual currency may only be used to buy online game items, the Ministry of Culture said in today’s statement. Game operators must provide the ministry with information about their virtual currencies, according to the statement.
Under new regulations released jointly by the Ministry of Commerce and the Ministry of Culture, virtual currency can now only be used for virtual goods and services that are provided by the issuer of the virtual currency.
The new regulations do define prepaid cards for video games - but according to the Ministry of Commerce, the rules are to limit the impact of virtual money on the country's real financial system.
Those caught using virtual money for gambling will also be punished by public security authorities, the Ministry said. The Ministry of Culture added it will step up supervision of of money laundering using virtual money and "other illegal online activities."
Virtual money has been fingered as a source of under-the-table payments, laundering, theft and fraud by China's government. In particular are "QQ coins" issued by Tencent.com, one of the country's top internet community operators with over 220 million users.
China's government-run media outlet Xinhua explaind in a 2006 report that QQ coins were originally intended to be used to buy Tencent.com services such as electronic greeting cards, avatars, virtual game chips, and Tencent software. But many users began trading the currency amongst themselves and in exchange for other goods and services - and more worrying for China's government - real yuan.
The practice had apparently become so widespread and publicized, some regulatory officials began worrying it could challenge the legitimate currency of China. Xinhua claims trade in virtual currency exceeded several billion yuan last year and increases at an average rate of 15 to 20 per cent annually.
In 2005 there was report in The Register that a Shanghai man was stabbed to death a fellow online gamer who sold a virtual sword they had jointly won while playing "Legend of Mir 3", Reuters reports.
Qiu Chengwei, 41, repeatedly stabbed Zhu Caoyuan after discovering that Zhu had sold the "dragon sabre" for 7,200 yuan (£464). Qiu had lent his friend the cybersabre last February, later reporting it as "stolen" when he learned of the transaction. Police, however, told him that - as the disputed weapon was virtual property - he had no recourse to law.
A Shanghai court heard on Tuesday that "Zhu promised to hand over the cash but an angry Qui lost patience and attacked Zhu at his home, stabbing him in the left chest with great force and killing him." Qui has admitted "intentional injury" and awaits the court's verdict.
China Daily noted that the sorry affair raises something of a legal poser regarding online "possessions". Wang Zongyu, an associate law professor at Beijing's Renmin University of China, told the paper: "The armour and swords in games should be deemed as private property as players have to spend money and time for them."
A lawyer for a Shanghai-based internet game company countered: "The 'assets' of one player could mean nothing to others as they are by nature just data created by game providers."
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