The identity of money

Michael Williams asks what the difference really is between "real" and "virtual" money:

The line between "virtual" money and "real" money is very fuzzy, especially in an age where even real money is earned and spent mostly electronically. I get my paycheck directly deposited to my bank account, I manage that account through a website, I spend the money with a credit card, and I pay off the credit card through another website. I rarely handle cash, even for very small transactions. So what's the difference between a Chinese yuan and a QQ coin?

HONG KONG -- China's fastest-rising currency isn't the yuan. It's the QQ coin -- online play money created by marketers to sell such things as virtual flowers for instant-message buddies, cellphone ringtones and magical swords for online games. ...

Then last year something happened that Tencent hadn't originally planned. Online game sites beyond Tencent started accepting QQ coins as payment. The coins appeal as a safer, more practical way to conduct small online purchases, because credit cards aren't yet commonplace in China.

At informal online currency marketplaces, thousands of users helped turn the QQ coins back into cash by selling them at a discount that varies based on the laws of supply and demand. Traders began jumping into the QQ coin market as an opportunity to make a quick yuan off of currency speculation.

State-run media reported that some online shoppers began using QQ coins to buy real-world items such as CDs and makeup. So-called QQ Girls started accepting the coins as payment for intimate private chats online. Gamblers caught wind, too, and started using the currency to get around China's anti-gambling laws, converting wins in online mahjong and card games back into cash. Dozens of third-party trading posts sprouted up to ease transactions, turning the QQ coin into a kind of parallel currency.

The only thing that separates QQ coins from yuans is that the former isn't issued by a government... but then that's never been a requirement in the definition of "money".

Michael goes on to explore Wikipedia's definition of money, and there's an interesting post comment on the same topic by Francis Porretto. One thing's for sure, though: when the tax man comes knocking on your virtual door, you'll know that your Linden Dollars or QQ coins are the real money deal.