Category: News-Opinion

Lab offers more celebratory items to mark SL10B

Posted on by Inara Pey

SL10BComing on top of the limited-time offer of the SL10B bear avatar launched last week, the Lab has offered-up more freebies for folk to celebrate SL10B, comprising:

The blog post also reiterates the SL10B Destination Guide category. Anyone organising an event to celebrate SL’s tenth anniversary can submit details of their activity for consideration for inclusion in the special DG category.

Sl10B mesh t-shirts from LL
Sl10B mesh t-shirts from LL

The post also includes a reminder of the Lab’s SL10B Photo Contest, which could see the lucky winners obtain a homestead region for up to four months.

Read the full update on the SL blog.

L$ resellers update: 29 registered and prices now compared

Posted on by Inara Pey

secondlifeIt’s now a month since the furore over the changes made to the Second Life Terms of Service relating to the buying and selling of Linden Dollars (L$) and which lead to the Lab writing to third-party exchanges (TPEs) requesting they cease trading L$.

Immediately following the change – which was officially referred to as an “anti-fraud” measure by the Lab, there was a lot of speculation as to the cause of the changes, most of it related to the guidelines issued in March by the US Treasury Department’s Financial Crimes Enforcement network (FinCEN), which I originally reported on back in April. There was also a good degree of confusion in the days following the announcement, with some exchanges receiving notification of a possible opportunity to resume some for of operations, while others found their SL accounts suspended, before everything was finally resolved with what some are referring to as a “climb down” by the Lab with the establishment of the “Linden Dollar Authorised Reseller Programme”.

Whether the original move was a direct result of the publication of FinCEN’s guidelines is actually somewhat debatable – as I’ve commented here across several articles. For example, blocking TPEs doesn’t actually mitigate the Lab’s own exposure as an MSB as FinCEN currently sees things; for another FinCEN gave all companies not compliant with their regulations six months to put their houses in order, and at the time LL announced the ToS change, barely two of those months had passed.

Again, as pointed out within this blog, there’s a reasonable argument to suggest that the change could have been a clumsy grab at revenue the Lab felt it was missing out on. One which may have been thought through in blinkered terms and put into play without any real understanding of how the move would actually impact a reasonable proportion of SL users.

At of June 8th, 2013, 29 organisations have signed-up to the programme

However, whatever the reasons, things appear to have calmed down somewhat, and in the 22 days since the launch of the Authorised Reseller Programme, some 29 organisations have signed-up and are now listed on the Linden Lab Official: Linden Dollar (L$) Authorized Reseller Programme wiki page.

The wiki page provides basic information on those organisations which have registered for the programme, including the currencies and payment methods they will accept from people wishing to purchase L$.

SL resident Uzi Boa (Joanna Bogacz in real life) has also compiled a reference guide for SL users wishing to purchase L$.

This provides the same information as the official website, but also includes details on typical prices charged for the purchase of L$1,000. She further breaks the list of authorised resellers into two parts: those which are operating as expected (i.e. accessible websites and services) – which total 16, and those which are described as  “listed by LL but not operating or with website error” (12 in all), for a total of 28 TPEs.  Hypno is listed on the LL wiki page but does not appear on Uzi’s page at the time of writing, or to actually be offering any services (the website noting that “webpage is only in Czech language. This time we are not able to accept random custommers from alien countries”).

Commenting on the comparison page to Maria Korolov in Hypergrid Business, Uzi stated she plans to try to maintain the information on the page and keep it as up-to-date as possible for the benefit of SL users.

If you’re unwilling / unable to use the LindeX for direct L$ purchases, Uzi’s page could be a handy resource for you.

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With thanks to Maria Korolov


Lab launches Authorised L$ Resellers

Posted on by Inara Pey

Update: May 18th: Podex and Gyndex have indicated they have applied for Authorised Reseller status with Linden Lab.

Upate May 17th: Gwyneth Llewellyn provides an analysis of LL’s move – very much worth a read.

secondlifeLinden Lab has issued a further statement on the recent changes to the Second Life Terms of Service relating to the buying and selling of Linden Dollars.

The blog post, which covers the fact that Linden Dollars can be purchased via credit card in using some 27 currencies and which includes the Lab’s “Getting and Spending Linden Dollars” Quicktips video, reveals that the Lab is launching a new programme of “Authorised Resellers” of Linden Dollars – a move which is likely to spake the most reaction.

The post reads in part::

Now, to give users more options and make it easier to purchase L$, we’re launching a pilot program of Authorized Resellers of L$. These sites are authorized by Linden Lab to purchase L$ on the LindeX and then resell those L$ using a variety of international currencies and payment methods. To be clear: per the Terms of Service, these resellers will not be allowed to purchase L$ outside of the LindeX (i.e. they will not be able to buy L$ back from users and cash people out). The list of Authorized Resellers participating in the pilot program is available here.

 If you would like to receive an application to the program when it formally launches, please send an email to LDollarSeller@lindenlab.com.

The initial list of Authorised Resellers comprises AnsheX, Buildo, VForEx Inc, VirWoX, and Zoha Islands, with more potentially to be added to the scheme – there is an invitation for other exchanges wishing to join the programme to e-mail Linden Lab.

The full terms and conditions for the new programme can be found on the SL wiki.

Related Links

SL ToS changes: Lab contacts TPEs; some get account suspensions

Posted on by Inara Pey

Update 17th May 18:45 BST: The Lab has launched an “Authorised Reseller of L$” programme. Initial report here.

Update: 17th May: Gwyneth Llewelwyn provides an interesting and thoughtful analysis on the entire situation. DXEchange has indicated it has received LL’s e-mail of a potential solution, and is considering the matter.

Update: 16:55 BST: The e-mail to TPEs is apparently light on details, but includes the following statement: “We have approached several organizations to discuss a potential solution that would allow them to serve their customers within the bounds of the updated Second Life Terms of Service. We will soon blog to share more information about this solution, which we plan to extend more broadly as well.” So it would appear that the “potential solution” may initially be made on a limited basis.

MBKash has also indicated it has received the e-mail from Linden Lab, as has Gyndex.

secondlifeThere appears to be new movement on the situation involving third-party exchanges dealing in Linden Dollars following the recent change to the Second Life Terms of Service, and movement of a most confusing kind.

On the one hand, blog posts have started appearing on various exchange websites noting that they have received further information from the Lab, and that matters may be resolved in a manner which would allow them to resume the provisioning and exchange of Linden Dollars to Second Life users.

ToS Change

On the other hand, some exchanges are indicating that the SL accounts they use to handle their in-world dealings have all been suspended by the Lab.

On May 7th 2013, Linden Lab updated section 5.3 of the Terms of Service, which deals with the buying / selling of Linden Dollars and third-party exchanges (TPEs). While the ToS appeared to indicate that while such exchanges were not “authorised” by the Lab, the re-wording gave the impression that users could still use such exchanges while re-emphasising that doing so was entirely at the user’s own risk.

However, a blog post announcing the updated ToS change stated the that use of third-party exchanges was “not allowed” under the new ToS, and shortly thereafter TPEs started to receive e-mails from Linden Lab ordering them to cease dealing in Linden Dollars and also to remove / disable all in-world ATMs from SL with immediate effect. Third-party viewer developers were also contacted and told to remove any links to TPEs within their viewers.

As well as leading to a lot of speculation as to the reasons behind the move, the combination of mis-matched ToS update and accompanying blog post, together with the e-mail to TPEs has led to a lot of confusion and upset.

The Good

However, a number of exchanges have indicated that they have had further communication from the Lab which may allow their to resume operations. These include, at the time of writing, VirWox, CrossWorlds and Virtuateq (the latter’s update is in Dutch).

The VirWox update reads in full:

Good News: Linden Lab has approached us with a potential solution that would allow us to serve our customers within the bounds of the updated Second Life Terms of Service. We are in discussions with them and look forward to being able to share more information very soon.

Similarly, CrossWorlds also  reported:

We have received an e-mail today with regards the problem from Linden Lab. It informs us that there may be a potential solution that would allow us to serve our customers within the bounds of the updated Second Life Terms of Service.

As soon as I hear more I will let you know… and fingers crossed we can fix this problem.

It is not currently clear how many other exchanges have received similar e-mails from Linden Lab, which appeared to start issuing them late on Wednesday the 15th May, PDT, and so it is possible that updates may be forthcoming from other exchanges as the day goes on.

Quite what the “potential solution” might be is unclear. There has already been some speculation that it could be for TPEs to register as MSBs with the US Treasury Department’s FinCEN or perhaps providing evidence that they are properly registered under / adhere to any corresponding requirements within their country of operation.

The Bad

Elsewhere the news is not so good. In the early hours of the morning on Thursday May 16th (European time), Jacek Shuftan reported on the Podex blog that:

Tonight  at 2.00 o’clock all my accounts related to Podex Exchange were put on hold by Linden Lab.

I really believed that the new ToS is meant to protect avatars from the risk of fraud.  That was my goal as well so I was looking forward to cooperate with Linden Lab. I could not imagine that over one night they would want to destroy our cooperation and everything what I built for 6 years of my virtual life. They did.

I believed that they would answer my requests to start discussion. They did not.

Similarly, DX Exchange are also reporting they have had accounts suspended:

Our avatars for our exchange activities are put on hold by Linden Lab, so there is no room for interpretation that Linden Lab wants to enforce the new TOS effective immediately.

That means that we are closed permanently as of today.We expect Linden Lab to enforce the TOS on all other exchanges today.

Defying the ToS?

There has been some speculation that Podex accounts may have been blocked as a result of a decision by the exchange to continue to offer L$ in defiance of the ToS change  / e-mail, with Podex citing the 30-day “grace” period prior to changes to the ToS coming into force.

What is interesting here is that DX Exchange appears to have suffered the same fate as Podex (at least for the moment) after they had initially suspended operations, and then, according to Hypergrid Business, decided to follow suit alongside of Podex and others. This move apparently led to Bart Bockhoudt, co-owner of Gyndex indicting to Hypergrid Business that he would be objecting to the move by DX Exchange and seeking further clarification from the Lab. Whether this prompted some exchanges receiving account suspensions or not is also unclear.

However, one of the other exchanges which also opted, according the Hypergrid Business, to continue to offer Linden Dollars under the 30-day grace period cited in the ToS was CrossWorlds – who are one of the exchanges who have received the e-mail citing a “potential solution” from Linden Lab. Again, whether this is indicative that the likes of Podex and DX Exchange have / will also receive similar e-mails, and that the current account suspensions will be lifted / are the result of confused communications within the Lab, remains to be seen.

Still Confused

Overall, the result of these moves appears to leave the entire situation as confused as ever, and doubtless open to further interpretation and speculation. Expect further updates  as / when matters become clearer either via the Lab or through contact with the various exchanges.

Related Links

ToS changes, FinCEN and speculation

Posted on by Inara Pey

secondlife

Update, May 10th: Alex Kadochnikov has posted a further piece on the recent FInCEN interpretive guidelines on virtual currencies.

The recent change in the ToS affecting the use of third-party exchanges for L$ transactions was apparently accompanied by an e-mail from the Lab to such exchanges asking them to cease trading / cease trading in Linden Dollars.

So far, and as reported on Hypergrid Business, around eight exchanges have suspended trading in Linden Dollars while seeking clarification from the Lab as to whether / how they can continue to provide a service to users. Whether the suspension turn into an outright cessation of trading / operation obviously depends on the response obtained from the Lab.

Additionally, Oz Linden contacted TPV developers via the Opensource Development mailing list, stating:

Linden Lab has made a change to the Terms of Service – see the blog post at

http://community.secondlife.com/t5/Featured-News/Updated-Second-Life-Terms-of-Service/ba-p/1996185

If you are a viewer developer, and your viewer includes use of a third-party exchange for functions like ‘buy L$,’ it will need to be changed to use the LindeX instead. 

Some are speculating that the move is as a result of the FinCEN issuing a set of interpretive guidelines on virtual currency (which I commented about in April), possibly related to limiting the Lab’s exposure where other exchanges are concerned. As I’ve stated in comments following-up on the news piece on the change – and while, inevitably, IANAL), I’m not altogether convinced by those arguments per se, because there is nothing in the FinCEN guidelines which appears to fundamentally impact LL’s exposure in this regard – rather, they and third-party exchanges appear to be in the same boat where FinCEN’s guidelines are concerned.

US Treasury's FinCEN: examining virtual currencies
US Treasury’s FinCEN: examining virtual currencies

However, this is not to say that I think LL’s move is entirely unrelated to the FinCEN guidelines being published in March. Again, as I’ve commented both in this blog and elsewhere:

I would add that where there is a potential overlap between the two (the FinCEN guidelines and the SL ToS change), inasmuch as by attempting to limit any exposure of L$ to third-party exchanges and confine trading to LL’s own mechanism (the LindeX), the Lab might be trying to strengthen their position that the L$ is a “gaming token” rather than a “virtual currency” – which cuts to the heart of the core difference in their interpretation of the Linden Dollar’s status, and how FinCEN might regard it.

Of course, even in doing this, the Lab doesn’t escape FinCEN’s view that they are effectively a Money Service Business (MSB) and as such, are required to register as such with the US Treasury and meet regulatory requirements and adhere to anti-money laundering and other periodic reports. Some have suggested that the Lab may as a result face escalating costs in attempting to meet these requirements which may render the Linden Dollar, as we know it today, unviable to the company. However, as I stated back in April:

… there would appear to be questions as to how justified concerns over compliance (and the cost thereto faced by the Lab) actually are.

When it comes to money laundering in particular, Linden Lab already has a number of safeguards in place. Whether these are compliant with any requirements specified by the US Treasury is open to debate … However, it would seem unlikely that such safeguards would be without reference to any legal / regulatory compliance, even  if they only meet the bare minimum required.

Thus, how much additional work and expense would be required on LL’s part should they have to become a registered MSB isn’t that easy to ascertain; so dismissing them as being unable to comply, or that cost of compliance would be something the company would be unable to bear would appear to be perhaps premature.

However, it is reasonable to suggest that if this move is related to FinCEN, then quite possibly it is just an initial step, one which may well be followed-up in the coming months by further changes as the Linden Dollar’s overall status is further clarified as a result of dialogue between LL and FinCEN. Whether such additional result in the Linden Dollar becoming a closed currency without “real” value is entirely open to debate and beyond the considerations of this piece.

There is another question to be asked here as well. Which is this: while it might be unwise to totally dismiss FinCEN as having nothing to do with LL’s change in policy, are there other reasons why LL would make this move?

Well, yes there are. Here’s a couple:

  • It could actually have arisen as a result of the discovery of a fraudulent activity or situation which simply could not be ignored, and the Lab had to take drastic steps in order to ensure the door was firmly slammed shut on the matter
  • It might simply be an attempt to ring-fence the buying and selling of L$ for direct revenue gain. As WolfBaginski Bearsfoot points out, LL are potentially missing out on around $500,000 in transaction commissions going through VirWoX alone. While this may sound trivial, it could go some way to offsetting declining revenue from tier (which in 2012 amounted to approximately $762,000).

Then there is the way in which the change has been announced. If the reason behind it is purely a response to FinCEN setting out its stall in relation to virtual currencies, why couldn’t the Lab have indicated this to be the case? At the very least, and with more considered up-front communication blog-wise, it would have avoided the current levels of confusion, angst and speculation. And why the need to act in such an abrupt manner? It seems odd that if this course of action has arisen from the moves by FinCEN, the Lab explain the situation to users and third-party exchanges alike and give both X number of days to prepare for the changes to come into effect. Were they perhaps afraid that doing so would lead to a run on demand for L$ through third-party exchanges?

It is possible that whatever prompted the change to the ToS may never be known – particularly if it was, as mentioned above, related to a specific fraud-related situation or activity which the Lab could not afford to ignore.As such, this one change –  allowing for the current confusion and speculation it has created – is liable to be the end of things,

However, if it is as a result of the rumblings coming out of FinCEN as they cast their eyes across virtual currencies, then this might just be a foretaste of further changes to come.

Related Links

Lab updates SL’s Terms of Service

Posted on by Inara Pey

secondlifeThose logging-in the Second Life on Tuesday May 7th, 2013 were confronted with the need to accept the platform’s terms Terms of Service (ToS) once more. An official blog post on the matter states:

When you log in to the Second Life Viewer today, you’ll be asked to accept an updated Terms of Service. As with any legal document, it’s important to read in its entirety before accepting, but we wanted to highlight one of the changes we’ve made in this update: to better protect Second Life users against fraud, the updated Terms of Service make it clear that trading of Linden dollars (L$) on exchanges other than the LindeX, Second Life’s official L$ exchange, is not authorized or allowed.

 As the official exchange owned and operated by Linden Lab, the LindeX is the best place to buy and sell L$ for use in Second Life. It consistently offers the best rates for both buyers and sellers, and by limiting L$ trading to the exchange we operate, we are better able to protect users against fraudulent activity.

 The majority of Second Life users who purchase L$ do so through the Second Life Viewer by clicking on the “Buy L$” button. There will be no change to that function, as these orders are placed directly through the LindeX. Similarly, shopping on Marketplace will not be impacted.

The post also includes a link to the Knowledge Base article on the LindeX and the Quick Tips video on getting and spending Linden Dollars.

The core change to the ToS is section 5.3, which has been revised to read:

Third party exchanges are not authorized by Linden Lab and Buying or Selling Linden dollars on third-party exchanges are not authorized transactions. Third party exchanges are wholly distinct from both the LindeX exchange and Linden Lab and they have no affiliation with Linden Lab. We do not endorse or otherwise guarantee the legitimacy of the Linden dollar transfers offered on them, and we are not liable for purchases of such Linden dollars. Buying or Selling Linden dollars anywhere other than the LindeX is done so solely at your own risk. If you Buy Linden dollars that are traced to unauthorized credit card activity or other fraudulent activity, we will recoup these Linden dollars from your Account. The only authorized exchange is the LindeX.

All reference to any third-party exchanges using the Lab’s “Risk API” tool has been removed from the ToS, and the Risk API wiki page has been removed from the SL wiki, although the deletion log is retained for reference purposes.

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