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Virtual currency ruling promises virtual markets

By

January 20, 2010

Virtual currency ruling promises virtual markets

Virtual currency ruling promises virtual markets

The South Korean Supreme Court has ruled that the fictional “cyber money” used in online games can legally be exchanged for actual cash here in the real world. The ruling means that players of online games can sell their in-game currency to other players for real-world money. It also means that the South Korean government is going to tax the proceeds of those sales.

As reported in the Korea Times, the ruling came when the court acquitted two gamers who had been indicted for selling 234 million Won (around US$206000) worth of “Aden”, the cyber money used in the online game Lineage. Aden can be used to buy in-game accessories, weapons, and so on to enhance a player’s character in the game. The newspaper reports that the two gamers traded the money at an exchange rate of about 1 million Aden for 8000 Won.

The gamers were indicted and fined under a law that banned the exchanging of cyber money for hard currency. However, an appellate court overturned the decision, maintaining that trading cyber money for cash is only illegal if the cyber money is obtained through online gambling. In Lineage and similar types of online games, cyber money is earned through skillful gameplay and not by chance, according to the court. After the prosecution appealed, the ruling was upheld by South Korea’s higest court.

The ruling only applies in South Korea, but its effects may be felt well beyond that country’s borders. Industry observers are expecting the decision to stimulate the online gaming market – as well as the associated markets that surround the gaming market. And cyber money is big business. The Korea Game Development and Promotion Institute says that more than 830 billion Won (US$732 million) worth of cyber money was exchanged online in South Korea in 2006, and that amount might have exceeded 1 trillion Won (US$882 million)in 2008. With so much currency flying around, it is no wonder that South Korean courts have also ruled that the proceeds from trading cyber money are subject to a 10 percent value added tax (VAT).

Game industry observers expect that the online trading of in-game items and cyber money for cash will increase as a result of the ruling. The game companies may get in on the act as well, by handling the trading themselves. In fact, some social gaming companies already do this. Zynga, for example, accepts real money for in-game currency and objects in its various social games found on Facebook and elsewhere.

It will be interesting to see what effect Korea’s court ruling will have on the worldwide game currency market. Every locality will have to deal with not only tax issues, but also exchange rates and regulatory issues. When does a game provider become a bank, and whose laws govern cyber money that crosses political borders? Until these issues are worked out, you may want to stuff your cash in your real-world mattress.

See also koreatimes.co.kr.

Via Massively

3 Comments

This concept is not new. New is the governing body taxing fake money.

For a taste of how much real money can float around and be exchanged in a game, look up Entropia Universe. I don't play it because playability is horrible. The interface feels beta and clunky even with years of development. It's just not fun.

Runes of Magic sort of allows you to exchange real money for game money by providing an auction house exchange for 'diamonds' which normally can't be obtained without paying cash. You can then buy special in game items with the diamonds. Diamonds cost about 5 cents(US) and are worth 40,000 gold in game money.

Raum Bances
21st January, 2010 @ 07:25 am PST

This is what I loathed about Evony and ultimately quit playing (apart from taking inordinate chunk of my time when I was intense about it).

To keep up you either had to be hooked to your game about every 20 minutes and reposition your characters OR buy your fake in game progress with substantial real money. The first felt after a time a real drudgery and slavery, which is exactly what it was. It was hard work. The second I loathed. You had players who jumped many many levels in a day what otherwise took weeks of slow and tedious building 24/7 every 20 minutes at a time. It was skillfully devised in geometrical progression so whoever ultimately profited from Evony made serious money (Sure you heard that one about the inventor of the game of Chess and how he wanted to be remunerated in the real world: just place one grain of wheat on the first field, two on the second, twice that much on the third, twice that much on the fourth until you reach all 64 fields on the Chessboard. That is also how Evony wants to be played and paid.) If only some of the gamers became addicted but a little to "success" in this virtual world if the real one was somewhat less so. You had that fake "social world" that fed and pushed the game on you. People came to be pretty intense about their empires and alliances and I heard stories of the game spilling over into real life with double cross and similar. Scary. Where you have money to be made I am sure you also have power groups to take care of the business. You have people with addiction...and the undertakers (I mean entrepreneurs) is called mafia.

In fact...Evony started with downright exploitation of your less uptight self. You only felt like following that sparsely clad lady to play with...Oh, my Lord! Care to play with me? Just log in, it is free! Oh my Lord, really???

Maybe you could do some amount of "skillful gaming" as they say and earn your keep. But this "virtual thing" may become all too real. All the unintended consequences can pound HARDER than reality itself. You can have cruel games and games out of hands. This is what I suspect is what mafia, or for that matter investment and real life politics are all about: gaming skillfully.

nehopsa
24th January, 2010 @ 07:10 pm PST

"New is the governing body taxing fake money."

Where are you from, the US government has been doing this for years. Their fake money is known as the Dollar, maybe you've heard of it?

ecold727
24th February, 2010 @ 03:13 pm PST
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