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Really virtual finance

By davebirch posted Feb 3 2006 at 11:26 PM

At the 2005 Digital Money Forum, many of the delegates were genuinely astonished by Richard Bartle’s presentation on “real money trade” (RMTs) in virtual worlds.

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These are big money.  A current favourite is The World of Warcraft.  This grossed $500m worldwide in 2005, more than most hit movies ever take at the box office!  He also pointed out that the virtual worlds based in the US and Europe, such as Sony’s Everquest, are small in comparison to their Asian cousins: South Korea’s Lineage II, for example, currently has three million players (who pay around £15 per month).  And the boundary with the real world is getting blurred, especially for “traditional” financial service providers.  Because virtual worlds are where the next generation of customers are.  In fact, Wells Fargo have recently bought one of the islands in There (now renamed Stagecoach Island) to “teach young adults important lessons in financial literacy”.

The economist Edward Castronova, known as the first person to study virtual economies, famously calculated that the GNP per capita of Norrath, the imaginary world in Everquest, was somewhere between Bulgaria and Russia.  Avatars from Everquest trade for hundreds of dollars and there is a ready market for magic swords and the like.  There’s also an F/X market in platinum pieces (the currency used in Everquest).  Hong Kong-based IGE is one of the biggest virtual currency dealers and they have spent $25 million buying up rivals to the point where they claim to have half of the market.  At some point, banks will have to take notice: why shouldn’t my bank offer me Platinum Pieces as well as Euros?  And if it does, how far away are futures and other derivatives? Come to that, how far away is the FSA?

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