The Government is to take a firmer hand in policing activities within virtual worlds such as Second Life, in an acknowledgement of their increasing popularity.

Issues such as child pornography, identity fraud, money laundering and copyright infringement in virtual worlds are all "causes for concern" that need to be controlled, a government minister said.

According to the research firm Forrester, 7 per cent of young people aged 12 to 24 regularly visit a virtual world, and a range of companies including Boots, Coca-Cola, and Vodafone, have set up offices in Second Life as a means of appealing to its users.

Lord Triesman, a minister at the Department for Innovation, Universities and Skills, said that virtual worlds – the largest of which is World of Warcraft, which has more than nine million 'residents' – were "one of the most exciting technological developments in recent years." But he also told the Virtual Worlds conference in London that they present "sharp challenges" such as anti-social behaviour and identity theft.

At least the chicken kebabs were real

At the Virtual Worlds Forum in London, the line between what existed and what was imaginary was very faint

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He said he hoped that operators of such worlds – which range from the toy manufacturer Mattel to Linden Labs, the owner of Second Life – would take the lead in regulation, but that in some cases, particularly where children were involved, there was "a certain inevitability about Government involvement."

Residents of Second Life build 'avatars' – virtual versions of themselves – which can wander about, talk to other avatars, build houses, visit night clubs and buy virtual goods. In general the world has been self-governing, but it was recently forced to close all its casinos in order to fall in line with US laws banning online gaming, and has also given rise to several 'real world' copyright disputes.

Lord Triesman refused to be drawn on whether specific legislation was planned, and also declined to comment on one of the issues most keenly debated by observers of virtual worlds, namely whether money made in such worlds should be taxed. That was a matter for the Treasury, he said.

More than $1.5 million (£740,000) changes hands in Second Life every day, according to Linden Labs, and the world's own currency, Linden dollars, has a variable exchange rate with the US dollar.

Lord Puttnam of Weensgate, the former movie studio boss who is now chairman of the Futurelab thinktank, said that virtual worlds are now “as much a part of the marketplace as traditional media."

But, he went on, such worlds throw up a range of "difficult philosophical questions", such as whether virtual money is real enough to tax and virtual objects real enough to own. He also said that the issue of culpability needed to be resolved, arguing that it was "only a question of time" before someone pleaded, as a defence in criminal proceedings, that actions were not really theirs but those of a 'virtual person'.

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Times Online columnist Michael Parsons will moderate discussions of the economics of virtual worlds at the Virtual Worlds Forum. Click here to read more of his writing on virtual worlds

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