Lab calls a halt to the direct exchange of Linden Dollars to other virtual currencies

On Friday, March 13th, Hypergrid Business relayed news that Linden Lab has called a halt to the use of Linden Dollars outside of their own platforms.  The news itself came from the OpenSim based Avination, which has for several years provided the means to exchange Linden Dollars to their own currency (C$) via the use of an in-world ATM mechanism.

In an announcement, which has also been distributed to their users via e-mail, Avination state:  “Due to recent interaction with Linden Labs, we regret having to inform you that the transfer of Linden Dollars to Avination is no longer available, including the payment of your Avination sims via the Avination ATMs.”

The announcement goes on to further read in part:

Following discussions with Linden Labs they have advised that any use of Linden Dollars in payment for currency of ANY other virtual world, or for external services which are not used in SecondLife [sic] is in violation of the TOS …

According to Linden Labs [sic], users of SecondLife [sic] must cash out through LindeX before using real currency to pay for services not rendered within SL.

This move is being linked to matters of potential liability for the Lab. In 2013, the company moved to put greater controls on the re-sale of Linden Dollars through third-party exchanges. At the time, there was a lot of speculation (including my own) as to whether this was in response to FinCEN recommendations or as a more general means of dealing with issues of fraud, etc.

In 2013 the Lab moved to provide greater control over the re-sale of Linden Dollars, including prohibiting third-party exchanges from either buying back L$ amounts from users or providing them with the means to cash-out L$

While the Lab did subsequently allow third-party operations to continue to sell Linden Dollars to users (said L$ having been purchased from the Lab), a prohibition was placed on such operations to either buy L$ amounts from users or cash them out of the platform; a move which allowed the Lab to demonstrate it can effectively monitor and control the outward flow of money from Second Life.

However, it might be said the the use of in-world scripted devices such as “ATMs”, which enable the direct conversion of Linden Dollar values to other virtual currencies which can then be cashed out, potentially gives rise to liability exposure for the Lab, should it be shown that such mechanisms might be used for illegal purposes. Thus, the Lab has made this move to distance itself from such a risk.

In their announcement, Avination also suggest that this move may affect how Second Life users can pay for external services such as audio stream rentals in the future. Whether this is the case or not remains to be seen. Most of these services provide such a payment mechanism through a registered Second Life account, without any supplemental transfer of the value of the payment outside of the platform (the funds can effectively only be cashed-out via the Lab’s LindeX). Thus, there wouldn’t appear to be any issues with services working in this way to continue to do so. However, this is purely speculation on my part, and we’ll have to await official word from the Lab.

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10 thoughts on “Lab calls a halt to the direct exchange of Linden Dollars to other virtual currencies

  1. Qie

    Coincidentally, SL Go now accepts in-world L$ payment for that service, which I’m given to understand is a new development. That’s completely different from Avination, of course, but it would be another example of a service that’s provided externally but is of value only in the use of Second Life.

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    1. Inara Pey Post author

      Yup, I covered the SL Go pilot scheme here, and was going to allude to it in this article, but opted not to in order to avoid superfluous links🙂 .

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  2. Ciaran Laval

    Last summer I saw a post about Inworldz discouraging people from cashing out there instead of via Linden Lab and I pondered then how can people be doing this in the first place as I thought it was against the TOS, but apparently it wasn’t.

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  3. Nathan Adored

    I’m actually wondering how much of this is being driven by the banking system bigwigs shaking in their boots about things like Bitcoin potentially cutting them out of the loop wrt online transactions and the like, and have been elbowing their politicians to make stronger laws against transactions that aren’t under more direct control of the banking system and/or government flunkies. First they tried to put in place overly strong restrictions in cryptocurrency companies in New York, which they were later forced to backpeddle on when there was backlash from all over the world, then more recently they’ve started trying to put in legal restrictions in California, which is also starting to generate worldwide backlash. I don’t equate L$ exactly with cryptocurrencies like Bitcoin, but you can bet the powers that be are trying to place in restrictions across the board on virtual currencies… and/or Linden Labs is looking at these over the top actions by people in power and it has them spooked. On the other hand, it seems pretty likely that those for and behind cryptocurrencies will win and those trying to restrict the next generation of (virtual) money systems will be on the wrong side of history. But by reacting the way they are, LL are probably cheating themselves out of being a de facto virtual-currency for virtual worlds beyond SL, and I wager that likely L$ and systems that were originally spawned off of it such as OMC$ will be supplanted in virtual worlds by something backed by Bitcoin or the like, though maybe OMC$ will become much more tied to Bitcoin and stay afloat that way. Or for that matter, virtual worlds might just go directly to Bitcoin altogether, rendering things like L$ and OMC$ obsolete.

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  4. zzpearlbottom

    No matter why is a another wasted opportunity for the lab to be the center of the meta-verse.
    Of course for many virtual grids that dont even use a currency it is no issue but commercial grids will and must in fact turn to bitcoin asap and make it the main currency.

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    1. Inara Pey Post author

      In terms of user volumes, revenue generation, world-wide profile, the Lab currently is the centre of the metaverse as we currently define it, walled garden though it may be. As such, and leaving aside considerations of potential liability, etc., there is a question mark over whether or not provisioning and controlling the use of L$ to other grids would yield the levels of revenue the Lab would likely need to justify the expenditure of doing so in the first place.

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