Virtual World Business Licenses - We Need Them

The latest thing phasing Grace is the virtual marketplace.

I've maintained that a successfully managed virtual world engenders essentially three elements:

1) Socialization - adequate means by which people socialize, form and maintain affinity groups, communities and even develop whole new societies.

2) An Immersive and Participatory Environment and/or a likewise Culture - an environment (and culture) that encourages creative participation but in a way such that there is equal part to play in the consumption of other's works. Mediated or otherwise, creation and consumption is not one-way, but rather it embraces both the immersiveness and synchronicity of the platform.

3) A Vibrant Marketplace - the ability for people to define value and to transact on items of value on many levels, RMT being one of them, but not the only. This includes instances where there were two forms of virtual currency - one that is only usable in world, and the other that can be traded in RMT.

As I have spent considerable time traveling about the myriad of virtual worlds, I've been focusing some attention on #3, the marketplace. I am active participant in the Second Life economy. I still own my first land from Linden Lab and own parcels on private estates that are maintained by someone to whom I pay a monthly tier. I have the right to resell my parcels, but the only true land owner is the estate owner, I am more like a time share owner.

I shop routinely around the grid and I pay for overhead items such as streaming services. I've had several occasions of which goods I purchased were not delivered due to grid instabilities, outages or random glitches. I'm happy to report that on every account, the business owner replied to my request, was courteous and made the transaction whole. I've heard accounts of the opposite, but rarely and they are sometimes confounded with some added factor such as a language barrier.

As a large scale event planner and live musician, I've been on the receiving end of two shaky business agreements with well known organizations within the virtual world of Second Life. The first was a complete loss. This was an agreement with an organization priding itself on grokking business and virtual worlds, but a few weeks before our agreement was to be executed informed me that they were leaving Second Life and would not uphold their obligations. Unfortunately, we had no "legal" agreement. We had chat logs, note cards and email, most of which I presume would hold up in court as evidence but alas we had no master service agreement, or other recognizable business agreement. The second is on-going agreement dispute that I hope to have resolved soon. I have chat logs and a note card outlining the terms of the agreement, however in this case the party with which I am dealing seems intent to make amends. This is based on my simple request, not at the behest of any legal entity.

I also am a supporter of not for profit organizations operating in Second Life. I have given large portions of my personal time, resources as well as funds to a variety of non-profits from the well-known American Cancer Society's Relay for Life to smaller international organizations. I have had my share of curious transactions with these groups as well, and while I can verify that the organization that they claim to represent is actually registered, I cannot confirm that the avatars and organizations within Second Life are indeed affiliated - unless the real world entity verifies it for me.

All of these transactions are being conducted between entities who for the most part maintain a virtual and anonymous identity. I have no access to them from real world legal action, except in cases of DMCA violations and serious harassment claims that are mediated through Linden Lab. The virtual economy has become such a natural extension of my experience, that it was not until recently that I even stopped to think it odd that I would surrender monies to people, charities, or businesses that were not verifiable in some way.

I would not surrender the equivalent of $100USD to an online retail storefront without ensuring that I had a way to contact them. More often than not, I whois before I purchase from an unknown online entity. (yes, I just made whois a verb) However, I have handed over the equivalent of that to purchase a parcel in a virtual world. I am not alone. In Aug2008 alone, there were 10,406 transactions valued at over $50USD between two (or more) largely anonymous entities just in Second Life. What happens if you hand over a sizable chunk of your virtual currency to an entity and don't receive in return what you thought you were purchasing?

I don't know, and I hope I don't have to find out. But just thinking about this led me to a simple conclusion:

We need virtual world business licenses.

I want people to be able to maintain their privacy, and manage their online identities in ways that best suit them, but with provisions for equal access to the virtual marketplace. I don't know if this was the intent of the infamous "identity verification" movement, but if it was, I may have to rethink my position in that context.

I want to know that there is some way for me to whois a virtual business entity, and better yet I want the equivalent of a Better Business Bureau, but on an scale that covers the virtual world space.

I want there to be governance over the execution of transactions for real and virtual currrencies.

South Korea took proactive steps toward business licensing in 2007. The Korea National Tax Service(NTS), equivalent to IRS in the US, announced they would impose VAT (value added tax) on RMT from 1 July2007.

• Sellers who do between 6 and 12 million won/half year in business will have VAT auto applied by transaction's middle-man
• Sellers who do more than 12 million won/half year in business will need a business license and will pay the tax by themselves
  

An official from NTS, Mr Choi is quoted,

NTS would be able to track all transactions for taxation of virtual items – RMT. This is not about defining RMT legal/illegal; we don’t see any contradictory facts to Amendment for Game Industry Promoting Law - we are not about to judge if RMT is legal or not.

Should we wait until every country enacts its own set of policies? I know, it's complicated. The thought of how one might even start the discussion makes my head hurt, but we need to start that dialogue.

We have seen but the tip of the virtual goods marketplace. It is pre-embryonic, yet growing quickly and it will become an enormously profitable space for many bright, entrepreneurial people and if it continues in the manner in which it is headed may in fact be a giant disaster.

What do you think?

Where are the pitfalls?

Where are the upsides?

How might it work?

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