Can a cryptocurrency exist in a closed system? I am developing a online game that requires a realistic economy and currency.

I know I can create a new crypto coin currency with out much effort.  What I am unclear on, is it possible for me to mine all the possible coins of my currency, and then distribute them as I see fit within that game environment? 

My aim is to spare myself the effort of creating elaborate wallet and asset management systems in the game.
You could do this.

What you're describing is typically called a 'premine.' Ripple launched this way, and distributed half of the money, and kept the other half for development.

But from the sound of things, that's not really what you're looking for. For example, would you be okay with players transferring ingame currency in return for real money? Is it an important feature for players to be able to keep funds that aren't associated with any in-game account?

There are various things you can do to prevent those sorts of things, but they largely defeat the point of using a cryptocurrency.

Using cryptocurrency probably won't save you any time, either. At a rough guess, implementing a Bitcoin-derived solution for tracking player balances will take roughly fifty times more development time than a centralized solution.

Instead of creating a cryptocurrency, I suggest using a SQL table to track how much balance each player has. This is


faster,  
simpler, and  
allows easy central modification.