The Next Financial Crisis: Virtual Banks
By now, the financial woes of Lehman, Bear Stearns, Washington Mutual, and the many other troubled banks is old news.
But we may need to start preparing for another round of bank failures … in the virtual world.
If indeed it happens, a character named Ricdic will likely be to blame. Ricdic is part of Eve Online, which I have never heard of, but according to this BBC news report “has about 300,000 players all of whom inhabit the same online universe. The game revolves around trade, mining asteroids, and the efforts of different player-controlled corporations to take control of swathes of virtual space.”
Ricdic, according to the article, runs a large ebank at the site, and pilfered some virtual funds, traded them to other players for real money, and made a down payment on a house and paid off medical bills.
In response to the news of the scandal, there has been a run on Ricdic’s bank. As consumers lose confidence in Ricdic’s banks, it won’t be long before people get the idea that they should take their money out of any bank in Eve Online. And why should this banking panic not spill over to other virtual
worlds? The entire virtual banking system may be brought down by Ricdic.
There is some irony in Eve Online’s banking crisis: Eve online is run by an Icelandic company. The real Icelandic banks were some of the worst casualties in the financial crisis, and as far as I can tell, not through any fault of their own. Unlike the American banks which crashed because of sub-prime debt
exposure, the Icelandic banks fell prey to an old-fashioned bank run. Because the Icelandic banks were so big relative to the size of the Icelandic G.D.P., there was no way for the government to guarantee the banks, and therefore nothing to slow the bank run once it got started.
Again according to the BBC, this isn’t the first time there has been trouble in Eve Online. Apparently earlier this year one of the game’s biggest corporations was “brought down by industrial espionage.”
(Hat tip: Clayton A.)