China has imposed a new law declaring that virtual currency can no longer be exchanged for real goods and services, a decision that will effectively ban the practice of gold farming.
The "virtual money trade" was worth several billion yuan last year [one billion yuan is worth $146 million], according to a statement by the Ministry of Commerce of the People's Republic of China, and has experienced an annual growth rate of roughly 20 percent.
"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 Chinese government declared. The new rules also forbid the purchase of virtual currency by minors, while using it for gambling purposes is punishable by "public security authorities."
An estimated 80 to 85 percent of all gold farmers are based in China, generating revenues of $200 million to $1 billion annually, according to Richard Heeks of the University of Manchester. And while most game companies have rules against it, the practice remains widespread.
Chinese "online industry expert" Cui Ran said the government was attempting to "nip illegal online activities in the bud" by implementing legislation while it was still practical to do so. Despite the large amounts of money involved, he said the volume of trading is still too small to affect the Chinese economy, but as the industry grew it would eventually begin to have an impact.