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Non-convertible virtual currency

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Definition Edit

Non-convertible virtual currency (also called closed virtual currency)

is intended to be specific to a particular virtual domain or world, such as a Massively Multiplayer Online Role-Playing Game (MMORPG) or, and under the rules governing its use, cannot be exchanged for fiat currency. Examples include: Project Entropia Dollars; Q Coins; and World of Warcraft Gold.[1]

Overview Edit

It should be noted that even where, under the terms set by the administrator, a non-convertible currency is officially transferrable only within a specific virtual environment and is not convertible, it is possible that an unofficial, secondary black market may arise that provides an opportunity to exchange the "non-convertible" virtual currency for fiat currency or another virtual currency. Generally, the administrator will apply sanctions (including termination of membership and/or forfeiture of remaining virtual currency) to those seeking to create or use a secondary market, contrary to the rules of the currency.

Development of a robust secondary black market in a particular "non-convertible" virtual currency may, as a practical matter, effectively transform it into a convertible virtual currency. A non-convertible characterisation is thus not necessarily static.

References Edit

  1. Virtual Currencies: Key Definitions and Potential AML/CFT Risks, at 4.

Source Edit

See also Edit

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