There’s been a lot of talk lately about a new global reserve currency, or how the Yuan might overtake the dollar. One little-examined currency issue, however, is the role of virtual currency. Massively Multiplayer Online Role-Playing-Games such as World of Warcraft, which has nearly 11 million players worldwide, use an in-game currency system, where players can buy items, creatures, or even services from other players with virtual “gold”. In China, where a huge online gaming community exists, government officials are worried that, to some degree, virtual currency could replace the actual currency, and might even have a significant impact on the country’s economic system.

The problem is that virtual currency cannot be easily monitored by governments. The volatile online economies are governed by supply-and-demand to a much lesser extent than their real-life counterparts. Hyperinflation runs rampant, and competition is hardly a limiting factor. Thus, the savvy virtual businessperson can manipulate the virtual market with much less difficulty than they could on, say, Wall Street.

It’s not a real threat, though, because nobody would ever want to use real money to buy virtual gold, right? Wrong. In fact, some small companies in China have created “virtual sweatshops,” where they are paid minimal wages to play online games like World of Warcraft with the aim of amassing as much gold as possible. These companies then facilitate the sale of the virtual gold/goods/equipment to buyers across the internet in places like the U.S.and Europe. In order to restrict these types of sales, the government would need to restrict the internet itself, but even then, regulation is still difficult, as China has near 300 million internet users.

So will virtual currency overtake actual currency? Unlikely. Yet, one cannot discount the little-explored business opportunities offered in the online gaming community, especially ones where the number of players eclipses that of a small country. Expect to see the emergence of entrepreneurial businesses that deal with the creation of, trading of, and buying of virtual currency.

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