Linden Lab Moves to Restrict Banking in Second Life

Linden Lab Moves to Restrict Banking in Second Life

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Following complaints about several "banks" in the Second Life virtual world, Linden Lab has moved to prohibit in-game offers of interest or direct return on investments without proof of an applicable government registration statement or financial institution charter.

The banks at the root of the complaints typically offer unusually high rates of return, sometimes reaching 60 percent annually, according to the statement. Linden Lab is implementing the restrictions in order "to protect our Residents and the integrity of our economy." As a result of the decision, on January 22 the company will begin removing virtual ATMs and other objects related to in-world banking, and anyone who continues to offer unauthorized financial services after that date may face sanctions including account suspension or termination, or loss of land in the game.

"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," the company said. "But these "banks" have brought unique and substantial risks to Second Life, and we feel it's our duty to step in."

"There is no workable alternative," the statement continued. "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 full statement regarding Linden Lab's new banking policies in Second Life is available here.

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The workable alternative would be caveat emptor... why doesn't Linden simply announce that any and all banking is done at the user's risk? Inviting government regulation of banks seems crazy.

This seems like the beginning of the end (or the end of the beginning) of laissez-faire liberty in Second Life.

Archon:
The workable alternative would be caveat emptor... why doesn't Linden simply announce that any and all banking is done at the user's risk? Inviting government regulation of banks seems crazy.

This seems like the beginning of the end (or the end of the beginning) of laissez-faire liberty in Second Life.

http://en.wikipedia.org/wiki/Great_Depression

I think this may be an emerging sign of the behind-the-scenes "creative differences" leading to Cory Onredjka's departure last year.

Joe:

Archon:
The workable alternative would be caveat emptor... why doesn't Linden simply announce that any and all banking is done at the user's risk? Inviting government regulation of banks seems crazy.

http://en.wikipedia.org/wiki/Great_Depression

See also:

http://en.wikipedia.org/wiki/Savings_and_Loan_Crisis
http://en.wikipedia.org/wiki/Subprime_mortgage

In practice caveat emptor banking is a path that leads to tears and woe extending far beyond the contractees themselves. Otherwise, I'd agree with letting the marks take their falls.

-- Steve

Archon:
Well, both sides can play the wikipedia game.

http://en.wikipedia.org/wiki/Anarcho-capitalism

http://en.wikipedia.org/wiki/Laissez-faire


True, but those links are to theory and philosophy... mine were to historical events triggered by unregulated banking. I wish laissez-faire banking worked better in practice, as I like the ideals myself, but the historical record seems to show it doesn't work... and that the consequences of its failure extend far beyond the parties contracting with each other, which should make anarcho-capitalist hairs rise on necks.

-- Steve

I'm with Archon. If liberty and self-regulation are the touchstones of Second Life, then suck it up, folks. Real freedom means being able to screw yourself as many ways as you can imagine. If Linden Lab makes some high-profile announcements about it and people are still greedy and/or stupid enough to sink all their Lindenbucks into never-heard-of-'em outfits that promise the moon and stars, then they get what they get.

And what will the poor, naive Second Life denizens need to be protected from next?

 

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