Virtual Currency Becomes Real In South Korea

garylian writes "Massively is reporting that the South Korean Supreme Court has stated that virtual currency is the equivalent of real-world money. For those of you who might not be drawing the link, the core there is that selling in-game currency for real money is essentially just an exchange of currency and perfectly legal in South Korea. This could have sweeping implications for RMT operations the world over, not to mention free-to-play games and... well, online games in general. The official story is available online from JoongAng Daily."

Whats the diff?

[mishehu]

What is the difference between this and the S.K. gov't simply deeming that any money earned on the sale of "virtual currency" would be subject to income tax? That is, assuming they have an income tax there, which I do not know myself. I suspect that the US IRS and respective state gov'ts would take this opinion...

Re:The real reason

[tacarat]

Yep. Considering that they've been taxing game transactions transparently for years, I guess this is just catching up.

What? They haven't? Old school arcade players bought additional health in Gauntlet. The tax was rolled into the $0.25 purchase price. Continues (which are basically extra lives in a game) are the same thing. I'm sure there are other examples, but the taxman getting a cut on such "microtransactions" is nothing new. They just needed a way to do it with some of the newer setups.

Granted, now the problem is that this may have negative ramifications for the games due to the higher level of multiplayer interaction. Would duping become a crime equivalent to counterfeiting and thus carry big jail time?

Re:Legal?

[zerosomething]

Casinos do it all the time. Private currency isn't illegal

Re:Sweet!

[JoshuaZ]

I don't know what the S. Korean laws are but in the United States and many other countries gambling losses can be be written off except to cover taxes on gambling gains. There's actually been some complicated discussion about how this applies to professional poker (whether it is a game of skill, and thus a sport or luck based enough to be considered just a form of gamblings). One could potentially make an argument that games like this are close enough to gambling that they would be covered by such laws. I wouldn't be convinced by that argument but given that part of the logic of such laws is to discourage behavior that is seen as potentially addictive, a similar law might make sense here (assuming you consider the laws about gambling losses to be reasonable). Regardless, if they were taxing your in-game gains, you could at minimum probably write off the monthly subscription fee for the game. (Disclaimer: IANAL)

Guaranteed by Whom?

[Tisha_AH]

Given that the "currency" (units, seashells, whatever) have some intrinsic value in that you put labor into the creation of some sort of work product there needs to be a guarantee of the currency, someone or some-thing (government, bank, etc...) who backs up that currency with assets. Also an exchange would need to be established to control the conversion of this new currency into other units. If you do not have these mechanisms in place then your new currency is as valuable as wampum was to the American Indians.

When the European powers moved into the Americas they discovered that wampum was being used as a currency for the exchange of services and commodities and as a means of having portable wealth. The colonies, companies and fur-trappers would bring in mass-produced glass beads from Europe where they had very little value and exchange these to the Indians for furs, food and land. Within a few decades the entire system of wampum devalued itself and had collapsed.

Virtual currency is just 1's and 0's on a computer (our real currency is more like that now than it ever was). How easy would it be to create the equivalent of glass beads in our virtual wampum on-line society?

Re:The real reason

[DarkIye]

Also, doesn't converting other currencies to virtual currency cause a duplication of the money? I mean, you give the company your Korean won and they have to make you some cash. Well, unless they move the money to you from a virtual vault they own, and to have such a thing they'd have to change the whole system.

Re:Whats the diff?

[Jezza]

I suppose it's OK, if you can pay it with Linden Dollars.

I seriously don't see how this'll work. Real money has the "I promise to pay the bearer" (or similar) thingy, virtual currencies don't. This seems like a pretty huge difference, I don't think the South Koreans have properly thought about it. Imagine if I did pay my income tax with Linden Dollars... Do I only get virtual health care? (I'm a Brit... I realise in the US this isn't funny).

As long as I can't buy real things with my virtual money then it's not real money! As soon as I can, well then I guess it is (as long as the goods have title, I have to be able to resell them).

Re:So that means WoW gold is legal tender?

[Dr. Spork]

Actually, the way I read the decision, the answer to your question may be "yes." It does seem like the decision implies that non-state-backed currency is still a legal exchangeable currency. So yes, Korean banks might very well start publishing daily WoW-Won exchange rates. I think you're catching on to why this is an interesting development.

Regarding the risks to holders of a company-backed rather than a state-backed currency, I don't really see the big deal. I trust Blizzard much more than I would trust the national bank of Zimbabwe [typepad.com], and yet Zimbabwe dollars are traded in international markets and exchange rates are published. According to Oanda's currency converter, a million Zimbabwe Dollars will exchange for exactly US$2,702.70 today. Why are we treating WoW gold differently? It can't be because we trust Mugabe's financial wizards more than we trust Blizzard.

Re:So that means WoW gold is legal tender?

[lgw]

The supply of the US Dollar is controlled by the Federal Reserve, a private company. It's directors are appointed by the US government, but, still, private company. The US has been pretty bad about "letting the presses roll" over the past year or so - exchange markets sort that out very quickly. These virtual currencies are more stable than a great many national currencies. EvE's ISK supply is overseen by economic professionals (a smart move by the game company!), also more than can be said for some countries.

That's the thing about money - it's all pretty much BS, but it works anyway.