Second Life Outlaws In-World Banking

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Second Life Outlaws In-World Banking

Post  zenister on Thu Mar 27, 2008 10:58 pm

Linden Labs recently announced on their blog a ban on all in-game banking institutions that “offer interest or any direct return on an investment” if they do not apply the same government regulations that apply to real world banking institutions. This new ban is the direct result of Ginko Financial, one of the in-game banks in Second Life, causing players who invested money to loose over $750,000. Ouch. Since the collapse of Ginko Financial in August 2007, Linden Lab has received complaints about several in-world “banks” defaulting on their promises. These banks often promise unusually high rates of L$ return, reaching 20, 40, or even 60 percent annualized.

The breakdown of Ginko, and other banks, came as no shock to most players due to the high levels of interest they offered. When compared to a “real bank”, these sort of interest rates would have screamed “SCAM!” to anyone on the planet with a nominal sized brain. But in a world where almost anything goes, players swarmed these online banks and game them money hand over fist.

This step taken by Linden Labs was most likely a preemptive strike before the government stepped in to force certain regulations on any form of monetary exchange within the game. With boundless opportunities to make real world money and become an entrepreneurial clothing manufacturer or sex-bar owner, government regulations would have sent players running for the hills; thus ending any chance of Second Life’s survival.

According to a statement pulled from the Second Life blog:

As we did in the past with gambling, as of January 22, 2008 we will begin removing any virtual ATMs or other objects that facilitate the operation or facilitation of in-world “banking,” i.e., the offering of interest or a rate of return on L$ invested or deposited. We ask that between now and then, those who operate these “banks” settle up on any promises they have made to other Residents and, of course, honor valid withdrawals. After that date, we may sanction those who continue to offer these services with suspension, termination of accounts, and loss of land.

Remember, Second Life players, this ban will only affects banks that offer interest or other rewards to investors whether they be more money or free S&M gear. If companies who submit a registration statement, charter, or other applicable license from a governing regulatory authority, or who are merely conducting marketing or education, but not accepting payments - this policy will not be applied to them.

For more information on this new ban, you can read the full post by visiting the Second Life blog here.

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