[Dave Birch] When it comes to virtual money, as in so many things, China makes for a fascinating case study. It lacks an efficient online payment system and, together with its somewhat inflexible regulatory framework,this means that there are significant dampers on businesses ability to innovate around payment schemes. There, the results of this unfullfilled market demand has been the development of virtual currencies. These currencies, which were not originally intended for the purpose of generalised online payments, have absolutely exploded over the last few years. The key case study of TenCent is illustrative. They produced a virtual currency called QQ Coins and, as their IM platform dominates the market there, they soon achieved almost universal acceptance. Note that while TenCent has never Iallowed people to exchange the coins back for real money, QQ Coins circulate as “real” money. They are liquid because people have no concerns about the coins being accepted (a bit like Marks & Spencer’s vouchers in the UK: everyone will accept them because they know that if they don’t want to use them, someone else will).
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