Korean regulators have proposed limits on virtual cash transactions in online games in an attempt to curb online gambling.

Players who make large virtual cash transactions in order to gamble online could be fined up to $20,000 or imprisoned for up to two years under new laws planned by the Ministry of Culture, Sports and Tourism.

Most online games sites already limit players to trading no more than $290 per month, the Korea Times reported.

However, weak identity verification procedures make it possible for players to open multiple accounts by using borrowed or stolen identity card numbers.

The new bill will go before lawmakers for approval in September.

Korean lawmakers have turned their attention to online gambling after cracking down on video gambling arcades.

Many internet cafes, or 'PC baangs' as they are known in Korea, have been converted into arcades that allow customers to win cash on virtual slot machine games.

There are 17 government-licensed casinos in Korea, but locals are permitted to use only one of them. The casinos generate approximately $500m in income from one million visitors per year.

Some 9.2 per cent of the Korean population suffered from internet addiction in 2006, according to figures from the Korea Agency for Digital Opportunity & Promotion. Other statistics put the number at around five per cent.