http://kotaku.com/…

In addition to its ongoing crackdown on Internet porn, the Chinese government has declared that virtual currency cannot be traded for real goods or services.

Virtual currency, as defined by Chinese authorities, includes “prepaid cards of cyber-games,” according to a joint release issued by China’s Ministry of Culture and Ministry of Commerce on Friday.

“The virtual currency, which is converted into real money at a certain exchange rate, will only be allowed to trade in virtual goods and services provided by its issuer, not real goods and services,” the Ministries said.

The Chinese government estimates that trade in virtual currency exceeded several billion yuan last year, a figure that it claims has been growing at a rate of 20% annually. One billion yuan is currently equal to about $146 million.

The ruling is likely to affect many of the more than 300 million Internet users in China, as well as those in other countries involved in virtual currency trading. In the context of online role playing games like World of Warcraft, virtual currency trading is often called gold farming.

The most popular form of virtual currency in China is called “QQ coins,” a form of virtual credit issued by Tencent.com.

Tencent.com, which has about 220 million registered users — about as many as Facebook — is quoted in the Chinese government news release as “resolutely” supporting the new rule. The government justifies its ban on virtual currency trading as a way to curtail gambling and other illegal online activities.

The Chinese government, however, appears to be uninterested in regulating sales of in-game items for real cash. A report in the English-language China Daily says that in-game gear is not considered virtual currency, so selling virtual items can be expected to continue.

The trading of virtual currency for real cash employs hundreds of thousands of people worldwide and generates between $200 million and $1 billion annually, according to a 2008 survey conducted by Richard Heeks at the University of Manchester.

He estimates that between 80% and 85% of gold farmers are based in China.

“[M]any online games have a virtual economy and an in-game currency,” he states in his survey. “Gold farmers can play in-game to make some currency. They then sell that for real money — typically via a Web site and using the PayPal payment system — to other players of the game.”

Game companies typically forbid gold farming but committed virtual currency traders find ways around such rules. Some game companies have recognized the futility of trying to ban the practice and have built virtual commerce into their game infrastructure.

Lots of people are against gold farming and the trading of virtual for real goods yet these nearly half a million Chinese gold farmers and virtual traders are doing it because it pays better then any local, real job. If you want to improve the conditions of those individuals… allow open and free trade, enforce private property rights and contracts.

As real, legal tender, fiat currencies fall governments attack voluntarily used virtual ones.

http://www.freedomworks.org/…

Hidden deep in Senator Christopher Dodd’s 630-page Senate housing legislation is a sweeping provision that affects the privacy and operation of nearly all of America’s small businesses. The provision, which was added by the bill’s managers without debate this week, would require the nation’s payment systems to track, aggregate, and report information on nearly every electronic transaction to the federal government.

Call Congress and Tell Them to Oppose The eBay Reporting Provision in the Housing Bill: 1-866-928-3035

FreedomWorks Chairman Dick Armey commented: “This is a provision with astonishing reach, and it was slipped into the bill just this week. Not only does it affect nearly every credit card transaction in America, such as Visa, MasterCard, Discover, and American Express, but the bill specifically targets payment systems like eBay’s PayPal, Amazon, and Google Checkout that are used by many small online businesses. The privacy implications for America’s small businesses are breathtaking.”

“Privacy groups like the Center for Democracy and Technology and small business organizations like the NFIB sharply criticized this idea when it first appeared earlier this year. What is the federal government’s purpose with this kind of detailed data? How will this database be secured, and who will have access? Many small proprietors use their Social Security number as their tax ID. How will their privacy be protected? What compliance costs will this impose on businesses? Why is Sen. Chris Dodd putting this provision in a housing bailout bill? The bill also includes the creation of a new national fingerprint registry for mortgage brokers.

From the Senate Bill Summary:

Payment Card and Third Party Network Information Reporting. The proposal requires information reporting on payment card and third party network transactions. Payment settlement entities, including merchant acquiring banks and third party settlement organizations, or third party payment facilitators acting on their behalf, will be required to report the annual gross amount of reportable transactions to the IRS and to the participating payee. Reportable transactions include any payment card transaction and any third party network transaction. Participating payees include persons who accept a payment card as payment and third party networks who accept payment from a third party settlement organization in settlement of transactions. A payment card means any card issued pursuant to an agreement or arrangement which provides for standards and mechanisms for settling the transactions. Use of an account number or other indicia associated with a payment card will be treated in the same manner as a payment card. A de minimis exception for transactions of $10,000 or less and 200 transactions or less applies to payments by third party settlement organizations. The proposal applies to returns for calendar years beginning after December 31, 2010. Back-up withholding provisions apply to amounts paid after December 31, 2011. This proposal is estimated to raise $9.802 billion over ten years.

That third party exception appears to apply to places like Paypal but don’t many people use credit cards for their money source? Seems the government would end up getting that info anyway from the first party sources. Not to diminish how serious this proposal is but even if that isn’t the case having this on the books would just give them an incentive to expand on the idea later. I can see the reasoning now: “We need to make sure that terrorists aren’t laundering money through these payment proxies. Don’t worry… the data will be secure. We won’t use this for anything else. You’ve nothing to worry about if you’ve done nothing wrong. Right?”