Our Beijing bureau chief, Melinda Liu, is in town and mentioned to me yesterday that the Chinese authorities are cracking down on "virtual" currencies. What's a virtual currency, you ask? In online multiplayer games like World of Warcraft, players collect loot in order to buy weapons and armor for their characters, and to advance through the game. For many, this is a very, very serious pastttime -- as evidenced by this teen's reaction when his mother canceled his WoW account.

Some players are so serious, in fact, that they'll pay real-life cash for the virtual gold. When clever entrepreneurs figured this out, they started hiring people to work in "virtual sweatshops," playing WoW and similar games for hours at a time, collecting loot to later sell on virtual currency exchanges. This has started to worry Chinese officials, says The New York Times:

The coin of fantasy realms have already moved markets here. So-called QQ coins — a form of currency produced by the Chinese Internet giant Tencent — have sometimes risen sharply in value against China’s official currency, the renminbi, alarming officials at the nation’s Central Bank.

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Some people have even traded virtual currencies in China, and exchanged them for clothes, cosmetics and other goods.

Last year, nearly $2 billion in virtual currency was traded in China, according to the China Internet Network Information Center. Some experts say they believe there is a much larger underground economy in the virtual world.

And just as Beijing controls its real-life currency, the renminbi, it now plans to regulate these virtual currencies:

On Tuesday, China said that new regulations would restrict the trading and use of virtual money, and that virtual currencies would be banned from being exchanged for goods.

The government also said it was moving to fight online gambling and disputes over virtual coins.

In a release, Beijing said that while virtual currencies had helped promote online gaming, they have “also brought new economic and social problems.”

Beijing has repeatedly sought to tame the online gaming market with new regulations (and even Internet addiction camps) but the activity continues to grow.

The new rules, issued jointly last weekend by the Ministry of Commerce and the Ministry of Culture in Beijing, are the government’s strongest effort yet to tame virtual money.

 I think China's heading in the wrong direction on this one. They want an alternative to the dollar in global markets. How about QQ coins?