San Francisco (CA) - The virtual residents of Second Life are experiencing a banking crisis of their own after recently announced ban on unregistered banks. As of January 22nd, unregistered banks won't be able to offer interest or any return on investment. Now, virtual citizens are scrambling to pull their money out of banks and causing some institutions to close their doors.
Second Life is a virtual world that uses Linden Dollars as its currency. People can acquire Linden Dollars by exchanging real money or by paying a monthly subscription fee that offers land ownership rights, along with a monthly stipend.
Game developer, Ken Linden, said in a blog post that management usually doesn't step in between private affairs of Second Life citizens, but in this case unregistered banks brought "unique and substantial risks" to the game. In the past year, several in-game banks have been promising huge returns, sometimes reaching an annualized rate of 60 percent.
But with those returns comes risk and, according to Linden, many of those banks have defaulted on their deposits. Linden argues the ban on unregistered banks is vital to protect the virtual economy of Second Life.
"There is no workable alternative. 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," Linden said.
So on January 22nd, management will start removing any virtual ATM machines belonging to unregistered banks. As you can imagine, this news has caused a banking crisis because customers are now rushing to their banks and withdrawing all of their money. One virtual bank, JT Financial, had to temporarily shut down its ATM machines and when those machines were reopened, customers were limited in the funds they could withdraw.