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Bank Regulation Meets the Virtual World

By Maria Bruno-Britz, Bank Systems & Technology Typically, when a person goes online and decides to join a virtual world like Second Life, it's to escape the every day problems of the real world. What better way to get away from it all than to create a virtual persona and live vicariously through him or her? Well, a trip to Hawaii might also work, assuming you've got the cash! But I digress.

By Maria Bruno-Britz, Bank Systems & Technology

Typically, when a person goes online and decides to join a virtual world like Second Life, it's to escape the every day problems of the real world. What better way to get away from it all than to create a virtual persona and live vicariously through him or her? Well, a trip to Hawaii might also work, assuming you've got the cash! But I digress.We've been hearing over the last year about financial institutions setting up some kind of presence in the world of Second Life-both existing FIs and de novos. Banks feel this is a great way to get on the Web 2.0 bandwagon and create an online presence where they can relate to the next wave of their customers-the ever-wired Gen Y segment.

Of course, some of the financial ventures in the virtual world have proven a bit less reliable than others. It turns out that Ginko Financial, a virtual investment bank housed in Second Life, collapsed, announcing it could no longer exist as a financial entity. According to an article in Wired, the declared insolvency means Ginko would be unable to repay approximately 200,000,000 Lindens (U.S. $750,000) to Second Life residents who had invested their money with the bank over the course of its three and a half years of existence. The Linden is Second Life's currency.

Now Second Life members are calling for more regulation and transparency in their Web world. Regulation on Second Life-who would have thought? Looks like the lawlessness and carelessness that have become the hallmarks of the Web have finally gotten people talking. But what form will this regulation take? The article argues that self-regulation would be far more preferable to the government authorities becoming involved. I tend to agree. However, if Second Life officials cannot enforce the law, then the hammer of the federal government will likely fall on the virtual world with who knows what kind of consequences.

Either way, it sounds like there actually might be some movement to remedy the situation sooner rather than later. After all, online or not, people are just a tad touchy when it comes to the security of their money.

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