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Developers of epayment systems and virtual currencies should take a look at this CNN report in the transition of virtual currencies into the retail banking sector.

CNN report that in March, MindArk, creator of the massively multiplayer online role-playing game, Entropia, saw its wholly owned subsidiary Mind Bank granted a banking license from the Swedish Financial Supervisory Authority.

This license allows Mind Bank to be the first bank to directly incorporate real-money transactions with virtual-world activities.

Selling virtual assets directly between players for real-world cash has been strictly prohibited by most game publishers, which find themselves looped out of the profits.

This takes the exchange of virtual currencies into real monies to a new level.

While World of Warcraft and EverQuest users have engaged in “gold farming”, i.e. gathering weapons and other status symbols, and then auctioning these off, usually on EBay.

Games publishers have started to monitor with mixed results. In response, PlayerAuctions have adopted a PayPal-like approach where it brokers the deals, acting as an open marketplace for player-to-player exchange of digital assets.

CNN interviewed Simon Newstead who explained: “The idea with dual currencies is that there is a paid currency [Gold Coins], which is paid for using real money and exchanged between sellers and buyers. In addition, there is a second currency — a free or so-called ‘earned’ currency [Silver Coins] — which is gained through activity and progression in the world or game.”

“In this way,” he continues, “the economy can recognize different forms of contribution, and in newer economies these can also be traded between each other. For example, people earning currency and selling it to people who have less time but have real money.”

Virtual currencies in Second Life

Second Life’s marketplace includes objects and services for sale, including real estate.

In 2008, over $100 million worth of Linden dollars (Second Life’s currency) were bought and sold on its LindeX exchange.

“In Linden Exchange, the U.S. dollar part of the transaction is via PayPal, a well-known entity, so there’s a certain amount of trust that comes with it,” says Darrly Chang, co-founder of D&D Dogs, who sells virtual dog pets and avatars to Second Life residents.

CNN’s reports also discusses, GoldMoney, who launched a dedicated iPhone application allowing account holders to exchange gold and silver units within minutes.

This iPhone application let you manage your own digital gold like on other banking applications.

GoldMoney is firmly anchored to real-world assets, forbidding anonymous accounts.

This contrasts with E-Gold, whose founder pleading guilty to money laundering-related crimes..

How realistic is the prospect of a digital currency?

“It all comes down to trust,” says senior economist Frederic Neumann. “We trust the government to guarantee our ‘virtual’ money for real currency. [With digital gold] the gold standard is guaranteed by a private company. Governments already have several hundred years of sovereignty engrained in people’s minds, so that trust is very difficult to establish.”

Learn more at http://goldmoney.com/ and http://secondlife.com/whatis/currency.php

What’s been your experience buying and selling digital goods, especially if it involved virtual currencies?

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