Archive notice: This article was originally published on January 11, 2008. Links and embedded videos are preserved as part of the historical record.
As US operator Linden Lab recently announced, it now wants to draw the consequences and take tougher action than before in light of renewed cases of abuse in the financial sector. From January 22, the company plans to pursue a new policy that permits financial and investment-service providers only if they have an appropriate licence in “real life” and proof is available that the bank has been approved by official registration authorities.
“In principle, Linden Lab’s chosen approach of making its policy on financial-service providers more specific is the right one. If the requirements prove too restrictive in their implementation, however, this raises the fundamental question of the extent to which Second Life’s advertised intention of allowing companies unlimited creativity can still be maintained,” Deutsche Bank Research Economic Advisor Stefan Heng tells pressetext. According to the analyst, the question also arises as to whether Linden Lab, as a start-up company, can actually manage the rigorous removal of black sheep efficiently on its own. It was also still completely unclear which regional banking licences would be accepted.
Germany’s Wirecard Bank, which is represented in Second Life, takes a relaxed view of Linden Lab’s announcement and points to state oversight and Second Life’s role as an advertising-related platform for financial products. “The Wirecard Bank virtual bank branch in Second Life serves exclusively for customer advice- and information. No banking transactions are carried out. The Linden Lab decision therefore does not affect us. Furthermore, Wirecard Bank – like other real, full-service banks under state supervision that are represented in Second Life – is in no way comparable with the other businesses affected,” Wirecard Bank spokeswoman Iris Stöckl emphasises in response to an enquiry from pressetext.
With the policy, the makers of Second Life are responding to increased complaints from members who had gullibily entrusted their money to headline-making Second Life banks such as Ginko Financial. In Ginko’s case, account holders’ deposits could no longer be paid out, whereupon around 200 million Linden Dollars, the Second Life currency, worth almost 750,000 real dollars (€540,000), were lost. Although many Ginko customers were still able to empty their accounts in time before the bank ran out of money, the project ended in losses for many customers. Industry insiders suspect that this prominent example prompted Linden Lab to take a more restrictive approach to banks in future.
With its precautionary measures concerning bank branches, however, Linden Lab aims to make Second Life safer for members and more transparent in financial matters. The company says that confidence in a functioning Second Life economy is also to be maintained. Nevertheless, analysts believe the initiative did not come out of nowhere. Less than a year earlier, Linden Lab had already banned casinos from the online world’s surface because insiders had repeatedly pointed out that companies in Second Life operated in a virtually detached sphere and were also neither regulated nor monitored by any government.
