March 23rd, 2009 by Tim Greenhalgh
Iâ€™ve just had to pinch myself very hard â€¦ on hearing that sci-fi virtual world environment Entropia Universe has been granted a banking licence.
The gameâ€™s developer, MindArk, has received preliminary approval from Finansinspektionen, the Swedish Financial Supervisory Authority which allows the companyâ€™s Mind Bank, which serves as a central bank for all of the different virtual worlds within the Entropia Universe, to function fully as a commercial bank.
Entropia Universe has a cash-based economy and players can exchange real money for game currency at an exchange rate of 10:1 (ten in-game dollars to one US dollar). Last year, the virtual economy generated nearly Â£290 million across hundreds of worlds on Entropia.
Itâ€™s an extraordinary time to be launching any new banking institution, let alone one that is virtual and real – at the same time. This conjunction is slightly bewildering and leaves me feeling more than a little dizzy. In one respect, itâ€™s not that much more different than any online banking offering, but in another itâ€™s very weird indeed, in that the goods and services being bought and sold are just code – zeros and ones. They exist virtually – and in transaction records.
Deposits made into the Entropia central bank will be under strict European banking regulation with continuous monitoring and audit by financial authorities. Customers will be backed by Sweden’s Â£41,000 deposit insurance and the Mind Bank will offer interest-bearing accounts have direct deposit options and let players pay bills online. The company will also be able to offer loans to customers and issue bank cards.
Iâ€™m not suggesting that there is anything amiss here, simply that a financial institution supporting economies that work in the virtual space is a little mind-boggling.
But I suppose that when players can reverse out of an in-game economy and exchange their virtual wealth for cash in the real world, the threat of inflation from lack of controls is present â€“ but maybe not as much as in hermetically sealed virtual worlds, where weâ€™ve seen hyper-inflation and serious economic malpractice by players. MindArk believes the bank will help to control inflation by regulating the economy.
I hope the instruments they use will be more acutely tuned to the changing needs of the economy than those weâ€™ve seen deployed in the real crunched up world. Itâ€™s good to know that while Sweden is in recession too, the countryâ€™s banking system and financial leaders are considered very sound. President Obama cites Sweden as a potential model for resolving the current banking crisis, based on its highly successful handling of the previous crisis in the early 1990s.
If Mind Bank replicates the sound financial judgements that have helped to keep the Swedish banking system away from the worst excesses weâ€™ve watched unravel, then Entropia should be a sound investment environment – certainly more appealing than the current crop of banks.
And it also underlines again for us in PR the need to keep pace with the rapidly maturing and economically significant virtual spaces where people will be buying, selling, investing and engaging.Â