Home > Cyber War > China takes steps to criminalize “Gold Farming”

China takes steps to criminalize “Gold Farming”

Gold Farmers (apparently)

This week the Ministry of Commerce for The Peoples Republic Of China joins Korea in announcing a new initiative to implement controls on the conversion of virtual to physical currency. The press release on the MOFCOM site highlights the scope of the problem:

According to media reports, the virtual money trade topped several billion yuan (¥1B=US$146M)  last year after rising around 20 percent annually.

Though this move seems to be targeted towards individuals bypassing tax payments by transacting online money for real goods and services, it also touches on the greater problems of CyberLaudering and Gold Farming.

Gold Farming is of course not shovel, pick and dirt. It’s the act of playing an online game to earn game currency, and then exchanging this with someone else for hard currency. This is against the terms of use for most online games, Second Life, World of Warcraft etc, but because there are people (typically in the West) with more money than time, and people in emerging markets like China and India with more time than money, it was obvious that something like this was going to happen.

The money-starved spend their time generating online wealth, and then sell that to the time-starved for real money. Although eBay banned the sale of virtual items back in 2007 (typically swords and other ‘power ups’ for MMORPG’s), there are still innumerable ways of performing the transaction.

Nick Ryan’s article on gold farming indicates the market to be worth around US$10B per year, with over 1 million people involved. Though the Ministry of Commerce does not talk about this specific problem, it does mention that taking currency transactions outside the traditional money markets has the potential to impact the real financial systems.

QQ Coins

Though there are reports of fairly benign (but out-of-band) transactions, gamers buying groceries etc by exchanging popular ‘QQ Coins‘, there are a lot more reports of criminals using the virtual>physical transfer to launder money. As many games allow both conversion of physical>virtual and virtual>physical transactions, often at the same rate less a handling fee, this “cyberlaundering”  is an attractive route for criminals because it plays on the novel routes our law enforcement agencies are ill equipped to handle.

One simple route to doing this is for a collusion of buyers and sellers to transact online items at strange prices – for example the seller offers some trivial item for sale for some outrageous price, e.g. 1000 virtual coins, the buyer purchases this using virtual coins bought with stolen money. The seller then cashes out his profit back to US$ and the money is washed clean.

Of course the nature of the online world means that such transactions can be relatively small and numerous – it’s no problem to use technology to open hundreds, or thousands of accounts to move money without ever coming up on the radar.

For those who think of online services such as Second Life and World of Warcraft as “games”, consider this – if you could sit at your computer all day and play the “game”, yet at the end of the day be US$500 better off, tax free, and untraceable, wouldn’t that appeal?

  1. July 20, 2009 at 19:29

    interesting material, where such topics do you find? I will often go

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