The Economic Analysis of Regulating Virtual Currency in China

In this paper we examine the impact of virtual currency issue on money supply in the real world with the consideration of several factors in money supply model such as money multiplier and base money. We divide the ways to purchase into two types which are cash purchase and deposit purchase. And we analyze the impact of different ways to purchase on all factors in money supply model. The result is that cash purchase will increase the money supply in the real world. So we suggest putting forward a unified online trading platform to reduce the impact on the money supply. At the same time we pose a system for required reserves of virtual currency issue. It will cause virtual currency operatorspsila marginal benefit decline if they issue virtual currency continuously, and at last the marginal benefit will be zero. But the system will ease the inflation of virtual economy to a certain extent caused by issuing virtual currency unlimitedly.