China Government Bans Online Virtual-Currency Dealing Platforms for Minors

China, the world’s biggest Internet market, said it will prohibit companies that operate platforms for online virtual-currency transactions from providing services to minors in an effort to prevent abuses.

The ban will be implemented Aug. 1, according to a Ministry of Culture statement on its website today. Online game operators that issue virtual currencies for use in their titles won’t be affected by the ban.

The Chinese government has tightened control of the Internet as the number of web users rose 29 percent last year to more than 384 million, the most of any nation. China, which prohibits pornography, gambling and content critical of the government, has blocked access to foreign websites such as that of Facebook Inc. and closed local sites. Google Inc. cited increased censorship as one reason for closing its China search site in March.

The ban will affect platform providers including 5173.com and uu898.com, according to JPMorgan Chase & Co. analyst Dick Wei. The restriction won’t have “a meaningful impact” on game operators, he wrote in a report sent to clients today.

Virtual currencies from online games in China are traded on the Internet among players and used to buy swords, armor and other items for use in titles. Individuals earn virtual currencies as they play games and can also buy the virtual currencies with yuan.

Currency Regulation

The official Xinhua News Agency reported in November 2006 that the Chinese central bank may begin supervision of virtual currencies as they could affect the value of the yuan. The People’s Bank of China would put Q-coins issued by Tencent Holdings Ltd. under its oversight if they entered wider circulation, Xinhua reported at the time.

Virtual currency may only be used to buy online game items, the Ministry of Culture said in today’s statement. Game operators must provide the ministry with information about their virtual currencies, according to the statement.

Tencent, China’s biggest Internet company by market value, fell as much as 5.3 percent today in Hong Kong trading before closing down 4.7 percent at HK$126.00. The Shenzhen-based company is the country’s leading provider of online-game virtual currency, said Jake Li, an analyst at Guotai Junan Securities.

The ban on minors won’t affect Tencent, the company said in an e-mailed statement today.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

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