Abstract: As the rapid development of Internet, virtual money has become more widely used as a new exchange medium and payment method on the Internet. This paper tries to analyze the phenomenon of virtual currency. First of all, we will introduce the present development of virtual money in China. Then we will analyze the fundamental properties of virtual money and the reasons why virtual money arises in China. After illustrating two problems about virtual money, we give some policy suggestions. We consider that virtual money on the Internet is not money essentially but a good which undertakes functions of money. Though the virtual money will not impact the current finance system, it does exert some effects to the real life.

Key words: networkvirtualmoney, virtualproductsandadd-valueservice, thefunctionsofmoney, merchandise