Financial crisis in Second Life ended? Linden Lab launches Linden Dollar Authorized Reseller Program

Scene-with-atmospheric-shaders-offStop the presses! Linden Lab is out with a (potential) solution for the crisis!

I was doing some slight corrections on a post announcing my company’s participation in a public exhibit at Portugal’s National Museum of Ancient Art, with an OpenSim-based reconstruction of Lisbon before the 1755 earthquake, when all of a sudden Damien Fate plurked that Linden Lab has just announced their Linden Dollar Authorized Reseller Program, both on the community blog as well as on the SL Wiki, with a link to the relevant legalese.

And yes, five resellers are already listed — among them, VirWox and AnsheX. Only ZoHa Islands seem to have announced that they’re back in business.

Now, before you start jumping and screaming “Hoorah for Linden Lab!”, it pays off to read the small print. This is a reseller programme, not an “authorisation” to allow running one’s own exchange. What this means is that the “authorised resellers” will be allowed to buy and sell L$ on the LindeX (presumably at lower fees than the common residents) and offer them for sale on their own exchanges. They do not allow them to directly buy and sell L$ to residents. So all transactions have to go through the LindeX.

At a stroke, LL solves two issues.

First, of course, the legal one. By ensuring that all transactions go through the LindeX, this means that they can track them down efficiently according to the FinCEN’s guidelines. The conditions and terms specify very clearly that the third-party exchanges have very strict rules on how they operate: they need to have a special avatar for these transactions and no other way to buy or sell L$, as well as forfeiting the right to get L$ from any other source but the LindeX. That’s the only way Linden Lab has to guarantee that these “resellers” are fully validated and that LL has a degree of control over what they’re doing. In effect, I guess that LL can somehow claim that these “resellers” are just like “normal avatars” — and fully tracked that way, fully identified, without any question of doubt about who they are and what they’re doing. And — most interestingly! — Linden Lab demands that “authorised resellers” are fully insured and make proof of having the required insurance.

This allegedly seems to be enough to placate the Feds. But it also means even more credibility of these exchanges in the eyes of the residents.

But obviously Linden Lab also makes sure that they get the extra money from the third-party exchanges — since now they will have to go through the LindeX, and, even if the fees that LL charges the third-party resellers is very low, it’s still a bit more than receiving nothing at all. It’s a win-win situation for LL: instead of getting zilch from the exchanges, now they get a few dollars as revenue.

LL also promises, on their blog post, to look into alternative payment gateways beyond PayPal and credit cards. Well, we’ll see about that; as said on my previous article, they have promising that since 2005 and done nothing about it. Still, this means that all residents who are unable to use PayPal or a credit card to buy L$ have, as of today, five official sources to get them, thus easing the pressure, stress, and anxiety of all those residents with tier to pay (and clothes to buy!) and no way to get L$ for their real money.

Of course, there is a catch.

None of these exchanges are allowed to pay residents anything in exchange for L$.

What this effectively means is that you can buy L$ from the resellers, but you cannot convert L$ back to US$ or any other currency using their services (see point 9. of their services). They apparently cannot even give back their users any “valuable” thing in return for their L$. Bummer!

It will be interesting to see how VirWox will handle this. One of their interesting features was for users to be able to buy L$ and exchange them for, say, OC$ to use on OpenSim grids using OC$. Or, well, exchanging L$ for Bitcoin (and vice-versa). Will the new terms mean that VirWox is forbidden to exchange L$ for anything else? There is enough ambiguity in the usage of the word “value”. VirWox also runs its own partner programme (i.e. VirWox resellers) which has to be terminated, under this agreement, at least for L$ transactions.

Still, I guess that VirWox might be more interested in keeping itself in the business of selling L$ to prospective customers who are not allowed to use credit cards and/or PayPal, than to provide a “cash-out” facility for L$.

And finally I’m also looking forward to see if LL is going to announce the end of “cashing-out” at the LindeX as well…

So is the crisis over? I think there is still a lot open to discuss. What do you think?

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  • Im confused about it ….

  • Cashing-out & LindeX. Depends if a) LL still need to register as an MSB (are they trying to slide under the “stored value” get-out? Sseems unlikely, as they’d still be a “transmitter” even with these changes, and tranmitters appear to be excluded from the exception, but who knows with the Lab. b) The number and size of the regulatory hoops they must jump through as a result of registration as an MSB. As I’ve commented elsewhere, I’m not convinced this latter point is as huge a mountain for them to climb as is being claimed in other places.

  • You’re not the only one! But at least the dust is settling and we’re seeing some light…

  • Aye, I read that comment of yours 🙂 It seems a reasonable assumption, but apparently other residents have different views. I’m still curious to see how this will develop 🙂

  • Nenad

    Buying L$ was not big problem only cash out. For me paypal do not allowed to receive money in my country, I believe that there are many who have used alternative to paypal through the 3rd part excange (moneybookers ”skril”) the question is what to do now? we plan to gradually closing our business in SL, or just wait until LL Lindex excange improve for more payment options

  • Dave Bell

    Since I’ve seen a claim that a lot of small businesses that cash checks are caught by this, I do wonder if there’s some of the usual SL drama in the more extreme claims. But, since I have no experience of the USA, I can’t really judge the claims. The Western Union signs I see on British streets are pretty obviously not all one company. “Singh newsagent” in Scunthorpe looks like a small business. If the businesses have a similar structure in the USA, I’d expect FinCEN compliance costs to be at the low end of the scale. Several are Travel Agents, and I wonder if they would come under FinCEN regulation anyway.

    I think we’re all still guessing.

  • MySLMoney

    There are so many things to say and also so many things to come.
    It’s like knowing or lightning would fall!

    There were before three categories resellers of lindens

    • 1 sim owners who resold their profits perceived by the “fees” (by avoiding to spend lindex).
      Strangely we find the famous owners of sims in the list of authorized dealers.

    • 2 exchangers: they were the intermediaries between residents who bought or sold Lindens taking their commission in the process.

    • 3 Conventional retailers who did the same job as the currently accepted work were to sell lindens to residents with a variety of payment solutions.

    The first can not resell the theoretically more lindens that come from “fees” and must buy the lindenX
    The second must also buy the Lindex
    The third will continue as before

    -The first offer one possible method of payment paypal
    they will have to buy their linden in addition to paying their fees a linden.

    • The latter are more methods of payment but will now have to move the cash, whereas before they used the cash sellers of lindens.
    • The third will continue as usual to provide innovative payment solutions for maximum audience.

    Only he can still have a network partner and paid?
    they can always do it informally in real currency.

    We can already predict that sim owners can not advance and pay cash at the same time their charges to their server.
    the exchangers will become resellers but their trade were not to sell but to play with the buttons (“trading”)
    And dealers have more than to pray linden not quickly developped of alternative payment solutions that come the conccurencer.

  • I’m a bit confused with your terminology. Sim owners are obviously prime candidates for accepting real currency and sending people L$, and, as such, many are fine with being just “resellers”.

    Exchangers, if I understand your terminology, are effectively put out of business with this change of the ToS.

    What are “conventional retailers”, and why will they be able to “continue as before”?

    As for anyone (except for LL) to continue to “pay informally in real currency”, this apparently is now strictly forbidden for Resellers. Others, well, they can continue to operate… until they get caught by LL and shut down 🙂

    And what do you mena by “dealers”? Are you thinking of currency speculators? Well, they will only be able to do so at the LindeX, so, yes, they will need to hope that LL adds more alternative payment solutions…

  • A point well made… do these small shops operate under the FinCEN, or, as resellers (of, say, Western Union’s services), do they simply refer to Western Union as the MSB and don’t need to worry much about anything? If so, there would be a chance that LL’s “official resellers” could be able, in the future, to both exchange real currency for L$, and L$ for real currency, so long as they operate only via the LindeX.

  • MySLMoney

    hi gwyneth,
    No, sim owners are the worst candidates for selling linden.

    • They do not have time to offer support, they are too busy
    • They offer between paypal and paypal?
    • They deliver the lindens in a very long delay (often more than 24 hours)
    • Most of the time they will return your money by saying they had no linden, this happened to me many times with one of the dealers listed in the list.
    • They have no added value
    • Their role has consisted resell excess lindens from their fees
    • their platform is not secure (one of them had no respect what is written in the new rules, just the badge “authorized”)

    Here is my opinion on the LindenLab first list:
    who gives food to linden lab in the first
    dealer based in a tax haven
    and the true target VirWoX which earned less than half its value in two months,
    I present to you the new solution announced by linden lab !!! LinDoX

    explanation about my expressions, sorry for my english
    Conventional retailers = classic dealer
    and thank you for the quality of your posts

  • Ah, thanks for the clarification! Well, to be honest, I never tried all the exchanges, of course, and there are tons I had never heard about. What I actually meant is that, in the past, some of the sim owners have established non-English-speaking communities with residents who couldn’t buy L$ from the LindeX. Since they were interested that these people would come to their sims and pay, it was only natural to offer them a way to do so. I remember, years ago, to meet people from some Brazilian communities who had no idea what the LindeX was… they just rented plots AND bought their L$ from the sim owners’ main website.

    But this was a long time ago. I can very well believe that many sim owners are less worried about selling L$ and much more worried about selling/renting/leasing land, and so you would be right: they might not have time to deal with L$ sales…

    The “added value” that SOME of those sim owners MIGHT have provided was the ability to get L$ using different payment systems. But, as said, I haven’t checked on ALL of them 🙂

    “one of them had no respect what is written in the new rules, just the badge “authorized”)”

    — now that is a very serious accusation! Is that one of the resellers on the list for Official Resellers? If so, you should report that to Linden Lab! The whole point of the badge is to make sure that the resellers are, indeed, following the rules!

    I’m also curious to see if any of those exchanges start operating from tax havens. I see that at least one is based on Singapore… 🙂 Is there anyone already operating from a tax haven?

    As for Linden Lab buying VirWox… well… some have speculated about that. It’s not impossible, of course, but I don’t see the interest in LL in getting a virtual currency that also works on 20 or so OpenSim grids. This would mean that LL was admitting that OpenSim is important 🙂 So far, they have tried to (officially) ignore OpenSim grids as much as possible (except for acknowledging that they exist and require a different viewer, since LL’s mainstream viewer includes licensed code that is not allowed to operate when connecting to OpenSim-based grids). But… why not? They could, after all, buy VirWox just to shut down the OC$ 🙂 It’s not impossible. I don’t think it will happen, though, because it means operating a subsidiary company in Europe, and that makes the whole thing so much more complicated. But it’s really a possibility. We will have to wait and see…

    So who are those “classic dealers” then?

  • I’d wait a bit and see what happens. LL has been promising more payment options since 2005… and I was reminded that at some point, around 2010/11, they actually did have a few more options, but then gave up on them. Let’s see if they really implement anything new this time!

  • MySLMoney

    you’re right, the owners of Brazilian sim had to create their structure, they proposed the bank transfer “Brazil Bank BB …”, the only way in 2006-2007 for the Brazilians to have lindens. But they had no more than 5 sims to manage.

    Yes the sim owner could offer other payment alternatives but it involves having cash. And operators as example paysafecard do not pay cash on the barrel…But sim owner need cash fastly to pay their sim.

    wait to see:)

  • Dave Bell

    And sometimes the light at the end of the tunnel is an oncoming express train…

  • Dave Bell

    There’s been some changes since all this was sorted out, and it’s become difficult to get USD into your Linden Lab account to pay USD bills such as Premium and Tier. You used to be able to use the Increase Credit page on the website. If your credit card issuer was awkward about payments to Linden Labs, you could at least get the money into your account via Paypal.

    Now that option is dead. Now, according to Linden Labs, the only way to get USD into your account is by converting L$ to USD. Which does sound like an attempt to work around FinCEN, as well as hurting those of us who are banking with the awkward squad.

    Luckily I am still in SL, rather than locked out as a defaulter, because there is a work around. The Limit Buy option to buy L$ will automatically take L$ though Paypal. The trick is to set a very high exchange rate, that nobody in their right minds would do a deal at, and then, after a few minutes for Paypal to give the USD to LL, cancel the Limit Buy order. The money goes into your USD account.

    Is this something that will worry FinCEN?

    As usual, Linden Labs score a big fat zero for communication with paying customers.

  • Shawn

    Really I rather they stayed with the old system, but because of legal reasons the least LL could have done was make the “Cash out” more quicker, instead of going through each one manually (my last cash out took almost 2 weeks!) make it more automatic after a first time validation.

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