Some interesting news today that Second Life is prohibiting players from acting like banks in the game by not allowing people to offer interest or other forms of return on investment (whether in the game’s virtual currency, or in real currency), unless they are registered as a financial institution in the real world.

I guess this makes some sense - as the line between virtual and real worlds becomes blurrier, games become no longer just games, and can have real impacts on people’s lives. So some of the regulations that are necessary in the real world to protect people from scams and ripoffs, such as financial regulation, may be necessary in virtual worlds too. However, it would actually be an interesting experiment to see how big the problems were in Second Life’s financial markets prior to imposing this regulation. How well did the free market function?

I also can’t help thinking of the more cynical angle that these regulations are as much about protecting Second Life’s commercial partners such as Wells Fargo from competition as they are about protecting game players from each other.