Virtual currency exchange 'good idea' yet tough to establish

Platform to trade in virtual monies or cash out for actual cash has niche appeal but difficult to set up due to international monetary regulations and lack of game operators' buy-in, analyst says.
Written by Liau Yun Qing, Contributor

The concept of a virtual currency exchange, in which gamers can sign up with to trade their in-game currency with other types of virtual money as well as real-world ones, may see a "good idea". However, it will be difficult to set up and flourish due to regulatory constraints and lack of game operators' buy-in.

Charlotte Miller, research analyst at Juniper Research, believes that there is a space in the market for such exchange systems to exist. This is because there will be people who wish to convert multiple virtual currencies to relevant ones according to the games they are playing at the moment or to cash out into real money, she noted.

However, this will be a very niche user group, she added.

Furthermore, while there are virtual currency exchanges such as First Meta Exchange in operation currently, and many of them trading in Second Life's Linden dollars, such businesses are difficult to establish, the analyst noted. For one, it would need to comply with anti-money-laundering laws around the world, Miller explained.

Another hurdle they would need to overcome would be online game operators unwillingness to provide an alternative platform to trade in their currency, she added.

"As virtual currency is typically used within the social and games markets for microtransactions, it is used to effectively lock users in to the service," said Miller. Therefore, game operators will strongly resist any attempts to push them to open up their currency, she added.

One gamer ZDNet Asia spoke to supports the idea of such exchange platforms though. Curren Seow, a Singapore-based account executive, said: "Time is money. The time that I have to play games is limited. Any sort of mechanism that can help me enjoy the game by cutting down on the grind will be useful."

Virtual no threat to reality
Asked whether the popularity of virtual currency will affect the actual real-world economy, Miller thinks otherwise.

"This would mean that a virtual currency has become so accepted it can be used to purchase physical goods. You have to ask whether the major social and games players really want to move into the physical goods space," the research analyst said.

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