For months, as banking meltdowns in the virtual world Second Life cost participants steep losses of real money, corporate owner Linden Lab of San Francisco stuck to a laissez-faire line, essentially saying, We just host the software; residents should avoid deals that sound too good to be true. But this week, Linden Lab abruptly banned virtual banks that can’t furnish “proof of an applicable government registration statement or financial institution charter.” The requirement appears likely to shut down all of Second Life’s banks.
“There is no workable alternative,” Linden Lab wrote in an announcement posted Tuesday. “The so-called banks are not operated, overseen or insured by Linden Lab, nor can we predict which will fail or when. And Linden Lab isn’t, and can’t start acting as, a banking regulator.” The company wrote that “these ‘banks’ have brought unique and substantial risks to Second Life, and we feel it’s our duty to step in. Offering unsustainably high interest rates, they are in most cases doomed to collapse–leaving upset ‘depositors’ with nothing to show for their investments. As these activities grow, they become more likely to lead to destabilization of the virtual economy.”
A Linden Lab spokesman said that the company was not offering further interviews or comment on the decision or its timing.
The about-face came six days after Technology Review posted a story that described avatar losses and cited the possibility that one virtual-bank meltdown may have produced aggregate losses of some $700,000 in real money to many hundreds of Second Life “residents” in a manner that would be illegal in the real world. (See “The Fleecing of the Avatars.”) “I think the timing may well have been due to [that] story,” says Ben Duranske, an Idaho lawyer who has been closely following the complaints of Second Life participants.
from TechReview
