ardenstone

Twice recently I’ve read an article about virtual currencies (mainly QQ) in China and how the Chinese government is a getting a little freaked out. Frankly, I think they’re probably right to be given how tightly they want to control the yuan.

Quick links for your edification:

• Forbes – China Cracks Down On Virtual Currencies
• WSJ – QQ: China’s New Coin of the Realm?

This is part of why the internet is so fascinating. A currency starts out, and is intended for, online trading of virtual objects. However, as has being going on for years, people are willing to pay real money for virtual objects (witness buying characters, etc.). Suddenly, we’ve jumped. Now other merchants are starting to join in, especially those that want to use micro-payments (say you want to sell access to your online book for $1). Micro-payments are hard because 1) nobody wants to go through the hassle of online paying for $1 and 2) the fees from credit cards are high enough that it’s difficult to make this economically viable (unless you’re someone like Apple who can really scale it up). So why not take a virtual currency, instead? Obviously this becomes cyclic: the more people that accept it, the more useful it becomes.

This raises some large concerns. Governments cite money laundering as a big one, but so is currency control. The more accepted a virtual currency becomes, the more it influences the physical (such as they are these days) currencies it interacts with. For example, if QQ becomes massively popular in China, and they suddenly change the way their currency is traded (for example: suddenly you can’t transfer more than $50 worth of it to any one individual in 24 hours), this could have very real effects on China’s currency and economy. That’s a hell of a thing.

There are all sorts of interesting things going on here. Which currencies are becoming popular? One imagines it starts with something that’s easy to use both for customers and 3rd party merchants, but what are the implications if you’re Nintendo and want to allow people to have some sort of “points” they can earn and trade online? Do you specifically limit this so that it’s only useful in your zone of control? This means you probably won’t have to deal with the some of these issues, but perhaps you want it ubiquitous? One imagines there is some real advantage to controlling a popular currency. Currency traders are looking into online currencies and starting to trade them, and after all what’s the difference? To them, it’s all virtual anyways.

This is the kind of thing that warms my nerdy, little heart. It’s also fun to think about this given my continuing learning about currency issues through business school.

Base of the Samosa – What’s in a name?

Due to classes and my involvement with Net Impact, I end up thinking and discussing “Base of the Pyramid” (BoP) issues a fair amount. These are often related to how to build partnerships so that businesses and the target communities (very poor people) both profit. The article above was one I found while researching SC Johnson’s efforts in Kibera, Kenya.

There are some great thoughts about being wary of defining a people solely by what they lack. In addition, one of the local NGO workers echoes my concerns with programs to Make Poverty History. They haven’t worked yet, and just throwing money to the poor, assuming the money actually gets to them, doesn’t necessarily do a lot of good. By definition this is a group of people that might be experts at making scarce resources last an incredible amount of time, but certainly aren’t experts about what to do with money.

Look at Taka ni Pato (trash is cash), a program run by CFK in Kibera and funded by the Ford Foundation. The project enables youth self help groups in Kibera to turn the community’s trash into a source of income, yet CFK has quickly learned that too much cash flowing too quickly could kill the very groups they are seeking to uplift, the groups that are now providing a much needed service to the community. Just because a group has increased income, perhaps for the first time any income at all, doesn’t mean that the group is ready to do something productive with that income. Are they mature enough to handle it? Do they have the transparency necessary to keep money issues from tearing the group apart? Do they have plans for tomorrow so they don’t spend it frivolously today? As Ibrahim Sakuda of Faulu Kenya reminds us, “As more income comes in, groups need time and help to broaden their vision beyond what they currently do.”