South Korea Rules Virtual Currency On Par With Real Money

This week, the South Korean Supreme Court made a ruling stating that online games' virtual currency, or "cyber money", can legally be exchanged for real world currency. The ruling also stated that transactions using this "cyber money" will be taxable.

This week, the South Korean Supreme Court made a ruling stating that online games’ virtual currency, or “cyber money”, can legally be exchanged for real world currency. The ruling also stated that transactions using this “cyber money” will be taxable.

If such a measure was implemented in the US, the implications for gamers and social games would be large. With Zynga reportedly on a $300 million revenue run rate for 2010, and 90 percent of revenue coming from virtual goods, we know that virtual currency is an estimated $270m per year market, just for Zynga. Now this ruling becomes interesting when we see players attempting to sell their purchased currency and items outside of the game, with taxes. This would be a source of revenue for the government, but also may cause Zynga to lose revenue. If I could sell some of my spare currency when I was tired of the game, or sell exclusive items I had won, this is money that Zynga does not receive.

Virtual currency trading and gold-farming in particular came under fire in 2005, when game companies began to take action against the practice which occured mostly outside the game itself. Game companies convinced eBay to stop listing virtual currency on its site, and the market began to shrink. Legitimate gold-farming businesses like IGE were forced to focus their businesses in areas like China, but last year, the Chinese Government stated that the trading of Virtual Goods for Real Money was illegal causing a real impediment for the industry.

In the US, the Unlawful Internet Gambling Enforcement Act of 2006 states that exchanges between virtual currency and real currencies have been illegal, although the specifics are murky. Specifically, as any poker player will tell you, the difficulty comes in converting the virtual currency in your account into real cash, and this applies for other online games as well.

Second Life credit card found via Next Nature