Linden Lab Official:Policy regarding inworld banks

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The Second Life Terms of Service prohibit offering interest or any direct return on 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. This applies to inworld investment funds, stock offerings, and banking services and the like.

Linden Lab will remove any virtual ATMs or other objects that facilitate inworld "banking," that is, that offer interest or a rate of return on Linden dollars invested or deposited. Those who continue to offer these services may be sanctioned with suspension, termination of accounts, and loss of land.

Usually, Linden Lab lets Residents decide how to act, live, or play in Second Life, but unregulated inworld "banks" brought substantial ecomonic risks to Second Life. Offering unsustainably high interest rates, they are in most cases doomed to collapse, leaving depositors with nothing to show for their investment.

This prohibition does not apply to companies that submit a registration statement, charter, or other applicable license from a governing regulatory authority; or those merely conducting marketing or education, but not accepting payments.

To report a violation of this policy:

  1. Choose Help > Report Abuse in the Second Life Viewer.
  2. Select Fraud > L$.
  3. Follow the instructions. IMPORTANT: Be sure to include the word "bank" in your description.


What is the reason for this policy?

There are several reasons that an inworld banking policy is necessary:

  • Legal risks raised by such activity.
  • Before this policy was enacted, several of these "banks" defaulted on their obligations.
  • Unsustainably high interest rates offered by many of these banks make it likely that others will default as well, which will have a negative effect on Second Life's virtual economy.

By "legal risks," do you mean virtual "banks" may be illegal?

There's no known guiding law or precedent that tells us whether these practices are legal. Depending on what statements each "bank" makes, and what depositors' expectations are, banking or securities laws may apply. If so, they would need to be chartered or registered with applicable real world regulators.

Are any of these "banks" really banks? Who runs them?

We're aware of no chartered banks doing banking business in Second Life at this time. Most of the ATMs into which L$ are transferred are merely run by other Residents. This is usually apparent to Residents when they conduct a L$ transfer, usually to the owner of the ATM at issue. A bank "deposit" thus operates no differently from other transfers of L$ inworld - it's just a transfer of L$ from one Resident to another. And as in the real world, if you do not know or trust another person, you should not ask that person to safeguard your L$.

Why not "virtually regulate" these "banks," instead of banning them?

Linden Lab can't and won't become a virtual banking regulator. Banking regulation, whether in the real or virtual world, is complex and intensive, and is a government activity. Linden Lab is not empowered to regulate the businesses of banking or securities. We can and will take steps, however, to ensure the stability of the Second Life economy, and that is what we are doing.

Are any other inworld businesses, such as stock exchanges, covered by this policy?

This policy is focused on objects and schemes that involve real-time transfers of L$ and payment of interest or rates of return. Exchanges may or may not do this, so they may or may not be covered. In addition, we reserve the right to remove any objects and take action against any Residents who are violating U.S. or other laws. If you are unsure whether a business you're operating abides by applicable laws (for example banking or securities laws), you should get a formal legal opinion, from a lawyer acting on your behalf.