Virtual assets 101: what is virtual currency?
We talked previously about virtual property – property that’s solely virtual in nature that isn’t tangible and has no real-world equivalent. One type of virtual property is virtual currency.
So what is virtual currency?
In this instance, we’re specifically discussing games, apps, platforms and other virtual economies.
In many games, players can use real-world money to purchase virtual coins, health/HP, items, or other measurable in-game resources. These resources can often be exchanged for other in-game virtual property, consumable items in the game or additional game features (like another game mode or extended story).
When we talk about “virtual currency,” we are specifically NOT talking about crypto-currencies based on blockchain technology like BitCoin, BCash, Ethereum, Ripple coins and others. Sometimes the words “virtual currency” get used to referring to each of these things interchangeably. In the next few posts, I’ll explore some of the legal frameworks around virtual property and virtual currency – but I won’t talk about blockchain. While it is possible that an in-game virtual currency could be tied to a blockchain ledger or a crypto-currency, I don’t plan to tackle that in this series.
How does virtual currency compare to traditional currency?
Traditional currency is a government-backed symbol of value. To be a “currency” means it is generally accepted as value, and can be traded (i.e., used to pay for things). Virtual currencies, by contrast, are not government-backed nor do they function as tradeable value outside the virtual world. When done properly, they have no real value. They may be an in-game commodity, but they are not truly “money.”
Regulations that apply to virtual currency that also affect real currencies include laws affecting money laundering, gift cards, gambling, lotteries and more.