Published in News
Second Life banking reform collapses
Rush on funds
Second Life is having financial problems with its virtual banks.
Linden Lab, which runs the site, has announced it will regulate the virtual banks strictly in Second Life from now on. One bank has collapsed amid a credit crunch that Linden said posed unique and substantial risks to Second Life and likely to lead to "destabilization of the virtual economy."
As of January 22nd, it will prohibit offering interest or any direct return on an investment in Second Life, without proof of an applicable government registration statement or financial institution charter. Already that announcement caused a bit of a panic on the Linden dollar. It can also be exchanged with the $US, at a rate of about $L270 to $US1.
The problem was that some virtual world inhabitants built "banks" or "ATMs" that were actually Ponzi schemes: paying high interest rates using the money of other depositors. The local economy boomed, but it proved unstable.