Virtual currency regulation in China specifically involves the use of virtual currency to buy real world products or services. The Atlantic did a very quick writeup in which they asked a prominent economist about the effects of virtual currency on the monetary supply and central banking systems of countries. The response was that while it may be a complication, it should be a non-issue in the long term.

As for the motivations that China has had for going after virtual currency they claim that the fear is that the trading of virtual currencies will affect the value of the national currency of China as the currencies were often traded freely against the real currency and did not have a value tied directly to real money (As reported by the NYT). As to whether the official line accurately reflects the concerns of the government of China, we still don't really know.

Given the currently relatively small value of virtual currencies compared to their government regulated counterparts I would not expect wide spread regulation of virtual currencies in the near future. Lets hope I am right.