BEIJING -- China should introduce laws and regulations immediately to prevent online virtual money from being used illegally or affecting the country's finances, said a lawmaker here Tuesday.

"Virtual currency has been hotbed for gambling and illicit trade under the guise of e-commerce", said Zhou Hongyu, a deputy from the central province of Hubei at the National People's Congress (NPC).

He demanded tighter controls on online gaming which allows players to exchange "virtual money" for real currency or property, saying it could threaten the healthy development of the cyber gaming and if the virtual money can be converted to real money the country's financial order could even be affected.

The most popular virtual money in Chin are "QQ coins" issued by the website Tencent.com, which has 220 million registered users.

QQ coins can be bought with bank cards, telephone cards or QQ cards for one yuan (12.5 U.S.cents) each. They were originally intended to be used to buy services including electronic greeting cards, cartoon portraits, chips for on-line games and anti-virus software.

Zhou worried that online service operators might keep the hard currency and use virtual currency to make payment so they could avoid paying taxes. He said virtual money could also be used to launder money.

Virtual credits could also breed online gambling as illicit earnings from gambling can be changed into real yuan online, he warned.

Zhou proposed that the People's Bank of China (PBOC) limit the use of virtual currencies. An official with the PBOC Han Ping, who is also a NPC member, says the central bank will continue researching the issue.

Several ministries including the Ministry of Information Industry last week issued an order barring Web sites allowing holders of virtual credits to buy hard goods.

China has the world's second-largest population of Internet users after the United States, with 137 million people online.