One open question, Bloomfield says, is whether the ban would pertain not just to banks but to stock-market exchanges that have also popped up in Second Life. The bling! The prim hair! One man even wore white gloves,” wrote Prokofy Neva (whose real name is Catherine Fitzpatrick) in her blog.īloomfield is hosting a forum on the matter in Second Life today at 2:00 p.m. “In a half-dozen of the largest banks, I saw the owners, CEOs, and chief financial officers all standing in the foyers, putting up notices and attempting to reassure their depositors. Yesterday, within Second Life, depositors appeared to rush to withdraw money from remaining banks, such as Midas Bank and BCX Bank, and some waved signs saying, “Linden Lab: Give Us Back Our Banks Now!” By one account, avatars of bank owners gamely stood guard outside their virtual institutions. (See “ Second Chance for Second Life.”) But he says that the larger Second Life economy, which by one recent measure has more than 300,000 participants, would not be profoundly affected because people will still be able to make, buy, and sell digital goods and exchange virtual and real dollars. Robert Bloomfield, a Cornell University economist and virtual-world watcher who had argued that self-regulation deserved a chance to fix Second Life’s financial problems, says he believes that banks will face runs and be unable to pay depositors, triggering new losses. As these activities grow, they become more likely to lead to destabilization of the virtual economy.” Offering unsustainably high interest rates, they are in most cases doomed to collapse–leaving upset ‘depositors’ with nothing to show for their investments. And Linden Lab isn’t, and can’t start acting as, a banking regulator.” The company wrote that “these ‘banks’ have brought unique and substantial risks to Second Life, and we feel it’s our duty to step in. “The so-called banks are not operated, overseen or insured by Linden Lab, nor can we predict which will fail or when. “There is no workable alternative,” Linden Lab wrote in an announcement posted Tuesday. Bank run: After Linden Lab’s Tuesday announcement that it was banning virtual banks in Second Life, some residents rushed to withdraw their virtual Linden dollars, while others (above) protested the company’s decision. But this week, Linden Lab abruptly banned virtual banks that can’t furnish “proof of an applicable government registration statement or financial institution charter.” The requirement appears likely to shut down all of Second Life’s banks. For months, as banking meltdowns in the virtual world Second Life cost participants steep losses of real money, corporate owner Linden Lab of San Francisco stuck to a laissez-faire line, essentially saying, We just host the software residents should avoid deals that sound too good to be true.
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