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Story URL: http://www.silicon.com/financialservices/0,3800010322,39169626,00.htm

Second Life clamps down on virtual banks
High interest in high interest...

By Tim Ferguson

Published: Thursday 10 January 2008

Virtual world Second Life is banning unregulated banks from operating within its borders in order to protect its users' investments.

From 22 January organisations will have to provide the relevant government registration statement or financial institution charter to operate within the virtual world.

Unrecognised 'banks' will no longer be able to offer interest or direct return on investment on Second Life's own currency, Linden dollars.

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The move follows complaints made by a number of 'residents' to Linden Lab, which developed Second Life, about these so-called 'banks' defaulting on promises made.

A statement on the Linden Lab official blog said by offering high rates of interest, banks "are in most cases doomed to collapse" - which could increasingly destabilise Second Life's virtual economy.

Linden Lab said these banks bring "unique and substantial risks" to Second Life.

The statement went on to say: "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. Linden Lab isn't, and can't start acting as, a banking regulator."

Unregulated organisations still offering financial services after 22 January will have their Second Life account suspended or terminated.

Back in July last year, online gambling was also banned from Second Life.