Industry Insights: Too Soon to Sound the Death Knell for Gold Farming?

What is perhaps a little less clear is whether a virtual currency, so defined, could be exchanged among players in a publisher-sanctioned marketplace as long as such virtual currency can only be used to purchase goods and services from the original issuer – the game publisher.  The answer may turn on the scope of the prohibition against the use of a virtual currency to purchase goods and services from anyone other than the original issuer.  Is exchanging a virtual currency with another legitimate player on a publisher-sanctioned marketplace for real-money equivalent to using that virtual currency to purchase goods or services from that other player?  That other player is certainly not the original issuer of the currency.  But, on the other hand, the currency is only useful as a means of purchasing goods and services from the original issuer.  The policy circular does appear to include a requirement that game publishers, as opposed to virtual currency trading platforms, implement technological constraints to prevent the transfer of virtual currency between user accounts.  Perhaps this clarifies that a virtual currency – one that can be purchased – may not be traded for real money.  And, if that is true, then we could perhaps sound the death knell for that aspect of gold farming that relies heavily on the sale of virtual currencies.  

Pursuant to the policy circular, companies already involved in virtual currency trading are required to register with the local cultural affairs bureau within three months and must meet certain regulatory requirements.  So, it looks like the current set of virtual currency and virtual item traders may be able to keep their doors open, assuming their applications are accepted and the regulatory requirements are met.  Gamers buying virtual currency and goods will no longer have stored value on these platforms or need to buy platform-specific currency and thus will have to pay directly at the time of transaction.  The loss of these trading platforms’ online currency system is likely to have an impact on customer loyalty, transaction frequency and conversion, but it appears that the real-money trading market, as a whole, will remain intact. 

The measure could directly affect QQ coins, of course.  QQ coins are the units of virtual currency issued by Tencent, which has moved outside just the online space, but also acts as a tradable currency in the real world for real items.  QQ coins have been known to be used to purchase physical goods, such as food and clothing, at points of sale in retail stores.  The policy circular issued last week follows a joint statement issued back in February of 2007 by 14 Chinese ministries and China's central bank in which the government and the bank called on companies to stop trading QQ in order to prevent money laundering.  That same month, five Chinese Internet companies, including Tencent, issued a joint statement urging the government to regulate the game-credit and virtual-property trade.  Last week’s policy circular appears to be part of the Chinese government’s response – the next step in the government’s attempt to gain control of the trading of QQ and similar types of virtual currency.  It has been reported that Tencent has issued a statement stating that it "resolutely" supports the new measures and will work with Chinese authorities to help prosecute anyone using QQ coins illegally. 

So, unfortunately, it remains unclear exactly how this measure will impact gold farming, if at all, an industry worth $500 million according to Professor Richard Heeks at the University of Manchester.  It appears clients of the gold farmers will still be able to use their sources to acquire in-game currency and other in-game items awarded through game play, but it seems likely that gold farmers will be barred from selling forms of virtual currency that can be purchased from publishers.  In the end, the Chinese government may find it difficult to reinforce any policy that curbs gold farming since many of the gold farmers operate on servers outside China.  Of course, gold farming was not explicitly cited as a concern for the government in issuing the recent policy circular.  As discussed above, the Chinese government seems more focused on protecting real-world currency markets and tightening controls on illicit activities, both of which are objectives that Live Gamer supports.  And, certainly any reasonable effort to curb gold farming that preserves the rights of a game publisher to choose to allow legitimate players to exchange virtual items in real-money transactions in a sanctioned forum in compliance with such publisher’s terms of service would have Live Gamer’s support, as well.

As more and better information becomes available, including answers to some of the questions regarding how this new policy will be interpreted, we will know more about the effect that this measure will have on gold farming and real-money trading of virtual items, in general, and we will look to update the game community on our latest thinking.

Laura Brown, senior manager, corporate development, Live Gamer, also contributed to this report.

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