If you haven’t heard the big announcement by Linden Lab that they’re finally closing down “illegitimate virtual bankers” in Second Life, you’ve been missing all the fun 🙂
The announcement on their Official Blog states:
As of January 22, 2008, it will be prohibited to offer interest or any direct return on an investment (whether in L$ or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter.
As you might expect, getting such a charter is pretty much impossible in almost all countries in the world, so this effectively means: no more virtual banks in the “Wild West” of Second Life. More information is available here (you need a valid Second Life account to log in).
Responses to Linden Lab’s decision have been interesting. Prokofy Neva, for instance, turned libertarian for a while:
And so ends the geek dream of a vast international space where money would never become an option…which made it possible for money everywhere to become an option growing out of every prim with a dollar sign hover-text. Money *is* needed to finance this Wild West world. Where will it come from now?
It will be interesting to see if any of the banks survive this transition, and if they don’t, what comes along in their place. It will also be interesting to see if there is a run on the banks now.
You can bet on that — Eloise’s colleague at Massively, Tateru Nino, usually reporting on community issues, statistics, and events that impact the virtual world, covered the protests at JT Financial, one of the leading virtual banking institutions that will now go out of business:
Of course there are panic withdrawals right now, because, at the end of the day the depositors simply don’t trust the banks to be able to repay the deposits, so everyone wants to get their account completely withdrawn as soon as possible, while the money holds out.
Most “banks” have already closed down their ATM networks, of course — at least the most fraudulent ones. They’ve learned the hard lesson from Ginko — it doesn’t pay off to be honest and stay around to try to fix things. Better to cash out and head for the next Caribbean island 🙂 Others, like the World Stock Exchange, have at least tried to keep their customers informed and provided them options to deal with the “banking ban” in the case it affects them.
The legal groups in Second Life, of course, see this as being only natural. Benjamin Duranske writes on his blog Virtually Blind:
My only complaint with this policy is that it has been too long in coming; it is clear and concise, and it undeniably makes the grid a better place. In the long run, policies like this, which acknowledge the obligations facing a company that offers users the chance to “make real money in a virtual world, that’s right, real money” (emphasis in original), will keep Second Life, and the grid in general, healthy and relatively free of regulation.
The irreverent lawyer Jessika Holyoke, writing on the Herald, suggests that different things are at stake here:
Additionally, Supply Linden generates revenue. Each purchase of Linden dollars is straight revenue. […] No capital investing in world, because they may be crooks, means that to raise massive amounts of Lindens you have to buy it through the LindeX.
An interesting theory. Would that mean that Linden Lab is actually just covering their own revenue streams by “monopolising” all currency-related issues? Does this mean that Raph Koster’s Metaplace, which will be open source and free, but will require people to buy microcurrency from his company, is actually getting it right?