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Parallel currencies "experts" have forgotten about

BIScom Subsection: 
Editorial Staff

If someone describes themselves as an "expert" or a "thought leader" in relation to, let's say, financial crime or FinTech or even on-line banking, ask them this - and don't give them time to look up the answer: "what's Q-Coin?*" And, is Second Life about to get a second chance as a potential money laundering vehicle?

Second life is really pleased with itself. It was formed in 2003 and, according to its website today, it has one million users. Back in the days when it was the current fashion amongst a trend-following media, it was almost impossible to pick up a newspaper and not see someone mention it or, even, have a conversation in London without someone asking if you were a user.

Second Life, briefly, became the subject of concern as to whether its virtual currency could be exchanged for real money and, therefore, become a vehicle for money laundering. The answer, like the answer to all such questions, was "of course, but at what cost and is it better than simpler alternatives?" Pretty much everyone lost interest in the money laundering risk, especially once it became obvious that, even if it happened, it would not touch the regulated financial sector and so there would be no reporting. Of course, that was all before the USA finally started to address the risk of money laundering by credit card and so banks were not bothered about that, either. Today, there might be more focus on it but then, when it was fashionable, no one cared. According to its website, at Second LIie, people are "creating and doing amazing things." Not large scale money laundering, it seems.

But while Second Life was, for a while, the Next Big Thing in the west, in China someone else was getting busy. In 2006, TenCent was coming to the attention of the People's Bank of China. LI Chao, the PBOC's spokesman, said "We will firmly crack down on virtual money if it is used to launder money" but gave no timetable. However, the real concern, which a decade later was the largely unspoken concern in relation to bitcoin, was that Q-Coin might destabilise the yuan. Q-Coin was TenCent's virtual currency used in its (then) online chat-room QQ.

In March 2003, QQ reached 220 million users.

Since then, QQ has mutated several times and now even provides an interface with the banned-in-China Facebook. It's closely related to WeChat.

In 2003, World Money Laundering Report wrote that Q-Coins "can be purchased with bank cards, telephone cards or QQ cards at an official price of one yuan (12.5 U.S. cents) and was originally intended to be used in buying on-line services provided by Tencent, including electronic greeting cards, cartoon portraits, chips in on-line QQ games and anti-virus software."

There have been, from time to time, scares about Q-Coin and QQ Payments being traded in secondary markets but, unlike Bitcoin, and the other less well known virtual currencies, it's never taken off, largely for the same reason as it didn't take off in Second Life: there are far easier ways of dealing in non-cash.

But, so far as TenCent is concerned, its Q-Coin and QQ-Pay are already outmoded: its latest iteration, WeChat Pay, already has an estimated 600 million users and it's soon to have integration options with Stripe (in Hong Kong) and, via that, Alipay.

A million users in Second Life? Pretty much de minimis so far as the volume of risk is concerned which, ironically, might just increase its appeal.

*Some people have referred to it as QQ-Coin because of the platform it was released on.