SAN FRANCISCO - Linden Lab has announced that virtual banking within Second Life will be banned beginning Jan. 22, having received complaints about Second Life residents being scammed by bank operators.
Linden Lab will prohibit offering interest or any direct return on an investment - in Linden dollars (L$) or any other currency - from any object located in Second Life, such as an ATM, without proof of an applicable government registration statement or financial institution charter.
"Usually, we don't step in the middle of resident-to-resident conduct, letting residents decide how to act, live or play in Second Life," said Ken D. Linden of Second Life. "But 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. At least as important, the legal and regulatory framework of these non-chartered, unregistered banks is unclear, [specifically on] what their duties are when they offer interest or investments."
Over the past couple of years, banking and associated services have become popular in the 3D online virtual world Second Life, with many offering interest schemes. Ginko Financial was the best-known failure among Second Life banks, owing 200 million Linden dollars ($750,000) to depositors when it declared itself insolvent in August 2007.
Linden said the company is unable to provide Second Life users protection related to in-world banks, whose legality is questionable.
"There is no workable alternative [to the ban]," he said. "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 decision is unlikely to affect virtual stock exchanges, but it may affect groups such as Second Life credit-card provider Metacard, which also previously offered bank services.
Banking will join gambling and bestiality on the list of banned activities in Second Life.
