Is it just new US bank regulations forcing the close of TPE's or....

[Alexxis DeCuir]

Just wondering why other virtual worlds, namely IMVU and Entropia Universe which allow the exchange of their virtual currency to rl currency on an open market, aren't all up in arms and forcing close third party exchanges for their virtual currency.. hmmm...

[Griffin Ceawlin]

Give them time.

[Sean Heying]

The Lindens have never made sense.

From their reactions to banking, through gambling, through the about face on homesteads, specialtreatment of Anshe, to nipplephobia and now stopping many European and South Americans from playing they... just... keep... messing... up.

There is  famous picture of Lucy of the Peanut's comic strip pulling a grid iron ball away from Charlie Brown as he is about to kick it. That is what the Lindens do.

One can never decode their intent, and to blame it on any government is wrong, it's just that they're [redacted] in the head right from the board of directors down.

 

All I know is my community is reeling, a lot of regions, good well built regions are selling up and leaving. I am loosing a lot of friends over this one, maybe as much as back in the SL5B stupidity of theirs.

 

* word redacted on purpose to maintain fig leaf PG ratings was.... "messed"

[jwenting]

the others are not a nice juicy target for DoJ hawks sniffing money.

And there's the political angle, which party did LL sponsor most in the last elections? If the GoP, they're now on the Holder hitlist, just as are Gibson guitars (among others).

[Drake1 Nightfire]

Entropia is owned by MindArk which is based in Sweden and not subject to US laws...

[Qie Niangao]

This is a good question. It's probably got a complicated answer, though, at least judging by what little sense I could make of the documents on the FinCEN website.

If I understand what I read correctly (and that's a big "if"), the relevant regulations have been around for at least a couple years, but the clarification that it definitely applies to virtual currencies (and BitCoin) is much newer. It doesn't seem that the Lab had any choice about responding to this new guidance, but I honestly can't tell whether their response is enough to comply, or if further changes are yet to come.

For that matter, I can't really figure out if this specific response (closing TPEs) was necessary. It's pretty clear to me that both LL and any surviving TPEs would have tons and tons of paperwork to comply with the regulations -- and it's likely that those TPEs would have to change their business processes dramatically to meet the reporting requirements, if it's even possible for them without changing what funding sources they accept.

It's also not clear to me that a virtual currency hosted outside the US would be immune from these regulations if it's traded on exchanges that accept payment from US financial institutions. It certainly seems the Feds want to regulate those transactions, but maybe there's a loophole there somewhere, similar to however foreign online gambling sites accept US payment (which is also a mystery to me).

[WolfBaginski Bearsfoot]

Putting it as simply as I can, other countries have their own laws to regulate banks and prevent money-laundering. There are suspicions that some foreign countries do it better than others, and there is the whole issue of tax havens, but it is unlikely that a Linden Exchange operating within such a system would have to comply with US laws.

There are internatioanl treaties on banking which set standards in this area.

I would not be surprised if the only way for Linden Labs to avoid the US system of regulation would be toi close down the ability to get "real" money out of the system. This would do huge damage to Second Life. A partial remedy would be to accept L$ as tier payment or only to allow the USD to pay bills from Linden Labs, but that might not be enough to escape regulation.

If there were TPEs already regulated as banks it would call into question the TOS clauses that try to make the L$ something other than money. The US Government might not regard the loss of the TPEs as significant, which would make the TOS a hollow claim.

 

Worst case, I think, is if the IRS in the USA takes a hand. If they want everyone to have an SSN, or the TIN they issue to foreign nationals, I wouldn't stay in SL. And that could be a result of being able to get cash out, rather than of the status of the L$. Cashing out is what makes SL different.

[Melita Magic]

---

WolfBaginski Bearsfoot wrote:

I would not be surprised if the only way for Linden Labs to avoid the US system of regulation would be toi close down the ability to get "real" money out of the system.

---

Ding ding ding! This is what I think will happen.

It is also possible LL will instead route all purchases and rent payments to other residents through LL officially, while taking a cut. Similar to marketplace.

 

[Freya Mokusei]

I'm not a US national OR a financial expert. I understand American's less than I do money. My only background is nearly seven years as a user, a large stack of reading on the subject of virtual economies, and reasonably close understanding of the Linden SOP circa 2007-2010.

It seems to me that these regulations aren't legally binding, that there's not going to be prosecutions based on them. They seem only to be recommendations. I could stand corrected on this, but a source would be nice.

Why LL is doing much about them, I have no idea. No other US-based online service has so much as mentioned a policy change (and unlike LL, most of them would give advance warning). If it is law-related, it makes very little sense for LL to do this jump first (LL is, by all statistics, a middle-of-the-road company, not a giant), before any other. I can only assume the people reading the new guidance really liked what they saw, or at least didn't think twice about legitimate users it might affect.

Certainly, no guidance has been published in any language other than English. Lindex has been left untouched, all of the knowledge bases, JIRAs, Live Chat have no new information. No Linden's have replied anywhere for comment, no justification has been given (indeed, it seems we're only guessing that the US regulations had anything to do with it in the first place). They're letting the userbase figure it out on their own.

[Miranda Umino]

Official IMVU sell credits from $ , but don t buy credits for $ .

Converting credits for $ has always  been in black market   on external sites

TPE for SL were using a risk API given by LindenI , a system to limit frauds . This system doens t exist for IMVU

TPE for SL were buying , selling lindens on the lindex when they didn t get funds enough . External sites for IMVU couldn t exchange with the official site in the two ways , buy and sell . 

 

 

[Amethyst Jetaime]

One more time people.  LL had to do what they did or face serious consequences. Don't believe that? Here is an article with links that gives more information on this from a RL virtual currency legal analyst that backs that up.  If you follow the links to his blog he gives further links to the actual laws and regulations that you can read for yourself 

You will probably see any game or virtual world where people can exchange RL money for virtual currency or vice versa make similar moves if they do any business involving the currency going into the the US or out of the US.  The regulations went into effect in March and business have 6 months before the treasury department starts prosecutions of those not in compliance so they would be well advised to have their legal ducks in a row well before then. LL probably is just he first company we've heard of to do this but others will have to follow suit. 

 

 

 

 

 

[Perrie Juran]

---

Freya Mokusei wrote:

 

It seems to me that these regulations aren't legally binding, that there's not going to be prosecutions based on them. They seem only to be

recommendations

. I could stand corrected on this, but a source would be nice.

---

On Fin-Cen's Web site they are officially referred to as "Guidance."

It is Fin-Cen saying how they think the actual laws apply.

In the end it would have to be a Court that decided whether or not Fin-Cen's interpretation was right.

You'd be fighting one heck of an expensive uphill legal battle to challenge it.

[Amethyst Jetaime]

Actually the regs are legally binding right now.  When congress passes a law it is then up to the executive branch , in this case US Treasury which FinCen is a part, to write the regulations regarding enforcement.  It can be challenged in court on the grounds it is unconstitutional or that the regulations do not reflect the law. 

The US government has a constitutional right to regulate currency and interstate and international trade.  There is nothing in these regulations that appears to contradict the actual law either.  These regulations were written months ago and the public was allowed to see and comment on them prior to them being officially published.  Generally during the comment period anything that might conflict with the law or constitution is pointed out by the battery of lawyers, constitutional scholars and citizens that review them.

As Perrie said it would be a long legal battle at this point and in this case and I am pretty sure you'd lose.

[Perrie Juran]

---

Amethyst Jetaime wrote:

Actually the regs are legally binding right now.  When congress passes a law it is then up to the executive branch , in this case US Treasury which FinCen is a part, to write the regulations regarding enforcement.  It can be challenged in court on the grounds it is unconstitutional or that the regulations do not reflect the law. 

The US government has a constitutional right to regulate currency and interstate and international trade.  There is nothing in these regulations that appears to contradict the actual law either.  These regulations were written months ago and the public was allowed to see and comment on them prior to them being officially published.  Generally during the comment period anything that might conflict with the law or constitution is pointed out by the battery of lawyers, constitutional scholars and citizens that review them.

As Perrie said it would be a long legal battle at this point and in this case and I am pretty sure you'd lose.

---

"Generally during the comment period anything that might conflict with the law or constitution is pointed out by the battery of lawyers, constitutional scholars and citizens that review them."

Sadly though when the people in office have an aggenda they don't always listen to the experts.

And there still are not a lot of legal voices who are speaking up on behalf of virtual worlds and E Commerce.  The number is growing but it is still such a young field of expertise.

 

[Madeliefste Oh]

---

Perrie Juran wrote:

 

And there still are not a lot of legal voices who are speaking up on behalf of virtual worlds and E Commerce.  The number is growing but it is still such a young field of expertise.

 

---

I have the idea that this law was not made with virtual worlds in mind at all.Virtual worlds are relative small, and not growing any more. It is Bitcoin that they are after, Bitcoin that caused these new laws. They labeled Bitcoin as "virtual currencies" because they are not legal tender under any sovereign jurisdiction, while the market value of the total bitcoin supply approached $1 billion USD.

As a site effect also virtual cuncurrency like we have in SL were impacted by this attempt to get a grip on Bitcoin.

[Miranda Umino]

Or facebook currency ( nevertheless abandonned)  , or amazon currency , or casinos currency .......

http://abcnews.go.com/Technology/amazon-introduces-amazon-coins-virtual-currency-buying-apps/story?id=19170199#.UZLq1LXQYrU

[Amethyst Jetaime]

---

Perrie Juran wrote:

---

Amethyst Jetaime wrote:

Actually the regs are legally binding right now.  When congress passes a law it is then up to the executive branch , in this case US Treasury which FinCen is a part, to write the regulations regarding enforcement.  It can be challenged in court on the grounds it is unconstitutional or that the regulations do not reflect the law. 

The US government has a constitutional right to regulate currency and interstate and international trade.  There is nothing in these regulations that appears to contradict the actual law either.  These regulations were written months ago and the public was allowed to see and comment on them prior to them being officially published.  Generally during the comment period anything that might conflict with the law or constitution is pointed out by the battery of lawyers, constitutional scholars and citizens that review them.

As Perrie said it would be a long legal battle at this point and in this case and I am pretty sure you'd lose.

---

"Generally during the comment period anything that might conflict with the law or constitution is pointed out by the battery of lawyers, constitutional scholars and citizens that review them."

Sadly though when the people in office have an aggenda they don't always listen to the experts.

And there still are not a lot of legal voices who are speaking up on behalf of virtual worlds and E Commerce.  The number is growing but it is still such a young field of expertise.

 

---

I agree with you about this.  RL laws are only now starting to 'catch up' with technology and things like virtual currency.  I am sure we will see more in the future not only in the US but in other countries as well.  The amount of money involved in all virtual currencies is just too large for goverments to ignore anymore.  I actually think it is a good thing that they are trying to stop crime connected to virtual currencies.  But unfortunately innocent people are caught up in the problems it causes and it could have been handled a lot better. 

A lot of people had their head in the sand over this one, not only by the lack of involvement during the comment period but by not keeping up with pending regulations to prepare for them so interruptions and service blackouts don't occur.  I hope it serves as a wake up call.  Everyone that is involved in virtual business, from service providers to exchanges, to large and small merchants,   needs to pay more attention to what is going on and speak up   Setting up a simple alert on Google to monitor this would go a long way toward staying informed.  Staying informed helps you to protect yourself and your business and will give you a voice.

[Aethelwine]

---

Amethyst Jetaime wrote:

One more time people.  LL had to do what they did or face serious consequences. Don't believe that? Here is an

article

with links that gives more information on this from a RL virtual currency legal analyst that backs that up.  If you follow the links to his blog he gives further links to the actual laws and regulations that you can read for yourself 

You will probably see any game or virtual world where people can exchange RL money for virtual currency or vice versa make similar moves if they do any business involving the currency

going into the the US or out of the US.

  The regulations went into effect in March and business have 6 months before the treasury department

starts prosecutions

of those not in compliance so they would be well advised to have their legal ducks in a row well before then. LL probably is just he first company we've heard of to do this but others will have to follow suit. 

 

 

 

 

 

---

That still leaves the issue of why now and why do it like this? the guidance and articles you have referenced make clear there will be no consequences for not following the regulations until August.

Closing the exghanges now is not forced by the US Treasury. It is a decision the lindens have taken to do this now and a decision they have taken either negligently unaware of or uncaring for all their customers who now have no means to buy linden dollars or convert them back in to their local currency.

[Freya Mokusei]

Thanks Amethyst for the links. NWN is pretty stoopid, but the link to epaylaw was clear enough. It'll be great to see how other virtual currency suppliers handle this.

Still leaves a bundle of questions for me, but even I've been forced to learn that you can't fight the Fed.

[jwenting]

---

Drake1 Nightfire wrote:

Entropia

is owned by

MindArk

which is based in Sweden and not subject to US laws...

---

maybe not, but any money entering LLs infrastructure through them would bring liability on LL. They'd need a license to operate a financial service in the USA in order to restart operations.

[Drake1 Nightfire]

---

jwenting wrote:

---

Drake1 Nightfire wrote:

Entropia

is owned by

MindArk

which is based in Sweden and not subject to US laws...

---

maybe not, but any money entering LLs infrastructure through them would bring liability on LL. They'd need a license to operate a financial service in the USA in order to restart operations.

---

How would money go from Entropia to SecondLife? They are NOT interconnected. You can not buy L$ in Entropia or Entropia$ in SecondLife.

[jwenting]

---

Amethyst Jetaime wrote:

Actually the regs are legally binding right now.  When congress passes a law it is then up to the executive branch , in this case US Treasury which FinCen is a part, to write the regulations regarding enforcement.  It can be challenged in court on the grounds it is unconstitutional or that the regulations do not reflect the law. 

The US government has a constitutional right to regulate currency and interstate and international trade.  There is nothing in these regulations that appears to contradict the actual law either.  These regulations were written months ago and the public was allowed to see and comment on them prior to them being officially published.  Generally during the comment period anything that might conflict with the law or constitution is pointed out by the battery of lawyers, constitutional scholars and citizens that review them.

As Perrie said it would be a long legal battle at this point and in this case and I am pretty sure you'd lose.

---

or as in the case of the destruction of earth as mentioned in the Hitchhiker's Guide To The Galaxy, the planning documents were on public display in a locked filing cabinet in a flooded basement without access stairs in a locked room with a sign "beware of the aligator" on the door

Such things happen. Especially with the veritable deluge of laws and regulations spewing out of government agencies all the time a lot of them get overlooked by the general public and interested parties alike, often even by those needing to sign off on them, until it's too late to stop them being enacted.

All of which doesn't make them any less of a real problem once enacted of course, nor make their legal standing any less real.

EU have a similar, though less serious, issue going on right now. A new 5 Euro bill was introduced early this month, without anyone seemingly knowing in advance except those working for the central bank and printers. Result is that most stores refuse accepting them, not recognising them as legal currency (pictures were only published on the day they were put into circulation, or later), and automated systems set up to detect fake currency similarly discard them as fakes (and bad ones).

[jwenting]

---

Aethelwine wrote:

---

Amethyst Jetaime wrote:

One more time people.  LL had to do what they did or face serious consequences. Don't believe that? Here is an

article

with links that gives more information on this from a RL virtual currency legal analyst that backs that up.  If you follow the links to his blog he gives further links to the actual laws and regulations that you can read for yourself 

You will probably see any game or virtual world where people can exchange RL money for virtual currency or vice versa make similar moves if they do any business involving the currency

going into the the US or out of the US.

  The regulations went into effect in March and business have 6 months before the treasury department

starts prosecutions

of those not in compliance so they would be well advised to have their legal ducks in a row well before then. LL probably is just he first company we've heard of to do this but others will have to follow suit. 

 

 

 

 

 

---

That still leaves the issue of why now and why do it like this? the guidance and articles you have referenced make clear there will be no consequences for not following the regulations until August.

Closing the exghanges now is not forced by the US Treasury. It is a decision the lindens have taken to do this now and a decision they have taken either negligently unaware of or uncaring for all their customers who now have no means to buy linden dollars or convert them back in to their local currency.

---

The exchanges could not legally continue to operate unless LL were to accept legal responsibility for any monetary fraud perpetrated through those exchanges.

LL of course doesn't want that, so they had to shut them down. Or rather publicly state in the TOS that the exchanges are not authorised (and thus that LL takes no responsibility for them) to operate on the grid.

If they want to act offline from the grid, LL couldn't care less no doubt as that'd be outside of the scope of LL.

[jwenting]

---

Drake1 Nightfire wrote:

---

jwenting wrote:

---

Drake1 Nightfire wrote:

Entropia

is owned by

MindArk

which is based in Sweden and not subject to US laws...

---

maybe not, but any money entering LLs infrastructure through them would bring liability on LL. They'd need a license to operate a financial service in the USA in order to restart operations.

---

How would money go from Entropia to SecondLife? They are NOT interconnected. You can not buy L$ in Entropia or Entropia$ in SecondLife.

---

was responding to the idea that a non-US company would still be allowed to trade in virtual currency for a US based virtual world in general, not a specific case.

[Perrie Juran]

---

Amethyst Jetaime wrote:

---

Perrie Juran wrote:

---

Amethyst Jetaime wrote:

Actually the regs are legally binding right now.  When congress passes a law it is then up to the executive branch , in this case US Treasury which FinCen is a part, to write the regulations regarding enforcement.  It can be challenged in court on the grounds it is unconstitutional or that the regulations do not reflect the law. 

The US government has a constitutional right to regulate currency and interstate and international trade.  There is nothing in these regulations that appears to contradict the actual law either.  These regulations were written months ago and the public was allowed to see and comment on them prior to them being officially published.  Generally during the comment period anything that might conflict with the law or constitution is pointed out by the battery of lawyers, constitutional scholars and citizens that review them.

As Perrie said it would be a long legal battle at this point and in this case and I am pretty sure you'd lose.

---

"Generally during the comment period anything that might conflict with the law or constitution is pointed out by the battery of lawyers, constitutional scholars and citizens that review them."

Sadly though when the people in office have an aggenda they don't always listen to the experts.

And there still are not a lot of legal voices who are speaking up on behalf of virtual worlds and E Commerce.  The number is growing but it is still such a young field of expertise.

 

---

I agree with you about this.  RL laws are only now starting to 'catch up' with technology and things like virtual currency.  I am sure we will see more in the future not only in the US but in other countries as well.  The amount of money involved in all virtual currencies is just too large for goverments to ignore anymore.  I actually think it is a good thing that they are trying to stop crime connected to virtual currencies.  But unfortunately innocent people are caught up in the problems it causes and it could have been handled a lot better. 

A lot of people had their head in the sand over this one, not only by the lack of involvement during the comment period but by not keeping up with pending regulations to prepare for them so interruptions and service blackouts don't occur.  I hope it serves as a wake up call. 

Everyone

that is involved in virtual business, from service providers to exchanges, to large and small merchants,   needs to pay more attention to what is going on and speak up   Setting up a simple

alert

on Google to monitor this would go a long way toward staying informed.  Staying informed helps you to protect yourself and your business and will give you a voice.

---

We could get Involved in a very long side discussion on this topic.  Just the issue of collecting sales tax on E Commerce in the U.S. is a big one.  We know LL has to collect VAT.  Someone has to watch over that at LL.  You can't just leave these things to automated processes.  It's an expense to LL.

We know that Fraud does occur in SL.  We know that people have been stolen from via Phishing schemes.  As I've stated elsewhere, I am of the opinion the Cash Outs for these have been done via the TPE's.  The Phishers operate with great patience.  One does not create an account today and Cash Out a quarter million Lindens tomorrow. 

To use SL to launder money would be a lot of work.  One Merchant in one of these threads mentioned cashing out $700,000L a month.  That's around $3,000US.  And while I'm certain that the risk API streamlines the process is it any wonder that sending the money is not done instantaneously.

I wouldn't be surprised if one of the things the TPE's will be required to do if a way is worked out for them to continue servicing Residents is slowing down Cash Outs on larger sums on money.  But that's just my two cents.