Tuesday, January 29, 2008

Gambling, banking & what next?

A couple of weeks back Second Life decided to place restrictions on banking activities in the Second Life. Let me quote some parts of the announcement:

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. We’re implementing this policy after reviewing Resident complaints, banking activities, and the law, and we’re doing it to protect our Residents and the integrity of our economy.

Since the collapse of Ginko Financial in August 2007, Linden Lab has received complaints about several in-world “banks” defaulting on their promises. These banks often promise unusually high rates of L$ return, reaching 20, 40, or even 60 percent annualized.

It is interesting that Second Life does allow 'real banks' to function in Second Life. Since this effectively legitimises banking in Second Life (provided you have a real world bank presence) then does it allows for real world bank transactions via Second Life? For example if I want to transfer money from a bank account, say in London, to another bank account, say in New York, am I subject to any tax by the relevant authorities? I think this opens up another can of worms for Second Life since it now really has to regulate virtual banks in its servers.

This comes right after Second Life bans gambling in the virtual world. Banning gambling is an easier way of complying with regulations since it allows Second Life to outright deny any association with such activities.

By doing the above, Second Life is essentially imposing certain form of regulations due to pressure from real life regulatory frameworks. Not sure how this would pan out for Second Life, but it is likely that Second Life would face more pressure for other 'content regulation' from now on. Guess they have to balance having more 'in-server activities' with vast freedom versus pressure from various regulatory bodies. Wonder if my Second Life avatar consumes a 'drug' which results in some visual / audio manipulation of my screen / speakers to simulate 'drug high', would my avatar be commiting any real world offences?

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