How legal are virtual banks and stock exchanges?
A recurring question, amid the forest of what might be legitimate failures and mismanaged enterprises or might just be scams, is just how legal are the banks and stock exchanges that operate alongside and inside various MMOs and Virtual Worlds such as Second Life.
As seems to be usual with legal matters, a simple question doesn't yield a simple answer.
We asked ASIC (the Australian Securities and Investments Commission) about virtual stock exchanges like the WSE. It took a while before we were able to get an answer, but as far as WSE-style exchanges go, they do not fall under the regulatory jurisdiction of ASIC - however their self-description as a game seems challengeable by Consumer Affairs/Fair Trading.
ASIC also pointed out that Managed Investment Funds using a stock exchange like the WSE would most certainly fall under their jurisdiction and would need to comply with all legal regulations of any such business.
Likewise, any business subject to the Australian Corporations Act offering shares of themselves on such a stock exchange would be in violation of the act.
As for banks, of course, do fall under ASIC regulation.
Banco Central do Brasil, Departamento Econômico when asked (and it wasn't easy) about banking ventures like the expired Ginko Financial told us that such unregistered banks were in breach of Brazilian law - they've apparently had trouble with unregistered banks before.
Likewise, you'll find that such unregistered/unregulated financial institutions are also in violation of New York state law. These regulations are common in many countries.
There's no real difference, of course, in a bank or stock exchange that deals over the Web, over the telephone or in a virtual world. The medium by which the business communicates with its customers is not relevant to their status, nor are the value tokens that are used as a medium of exchange.
With all that in mind, it is considerably more likely that even if a stock exchange or bank operating through a virtual world is not fraudulent or a Ponzi scheme, they are still more likely to be operating unlawfully than lawfully.
