The Two Faces of Meme Coins - (Part 3) Emerging as a New Fraud Tool

Global Market Cap Soars to 15.3 Trillion Won '442% Surge'Last Year's Trading Volume Grew 13 Times in a YearFake Coins Mimicking 'Official Trump' Appear'Memes' Issued by Celebrities and InfluencersPlummet in Minutes, Leading to Fraud InvestigationsUser Protection Measures in Korea'Regulatory Guidelines' Discussions Intensify

Meme coins, which are attracting attention in the cryptocurrency market with their explosive price increases, have now become a new tool for fraud. They are designed to stimulate human speculative psychology, aiming for a speculative jackpot. An analysis even shows that 97% of meme coins that have appeared in the real world have become worthless.

○ Sparking Speculative Psychology

According to CoinMarketCap on the 23rd, the market cap of meme coins listed on global cryptocurrency exchanges reached 15.258 trillion won as of 9 a.m. that day. Compared to January 24th last year (2.813 trillion won), the market cap increased by 442.4% in one year. During the same period, the global meme coin trading volume (24-hour basis) also rose from 2 trillion won to 27 trillion won.

Meme coins listed on cryptocurrency exchanges have at least passed listing standards such as public support at each exchange. However, according to Binance, the world's largest cryptocurrency exchange, 97% of meme coins that were issued as of November last year showed a trading volume of '0'. Since meme coins can be issued with just an idea, tens of thousands of meme coins are created daily. At the meme coin creation platform PumpFun, about 50,000 meme coins are generated in 24 hours.

Meme coins are created inspired by popular internet humor, jokes, or images, so they have no intrinsic value. They differ from other cryptocurrencies that gain public trust by disclosing clear developers, technology, and future utilization plans. Due to the lack of value, their price volatility is also very high.

○ Meme Coins in a New Phase

Cases of meme coins being used as fraud tools are also emerging. American influencer Hailey Welch created the meme coin 'HAWK' based on her popularity, but its price plummeted by 91% within three hours of launch, leading to an investigation for insider trading. Jamaican-American singer Sean Kingston launched the meme coin 'KING'. Its market cap reached $4 million shortly after launch, but it dropped to $400,000, a tenth, in just a few minutes. There is also an analysis that one out of six meme coins is a blatant scam coin targeting investors' money.

The launch of meme coins by the Trumps is seen as opening a new phase for meme coins. It is first expected that the U.S. Securities and Exchange Commission (SEC) regulations will be strengthened. Virtual asset expert Andy Lian said, "The launch of the President's meme coin has blurred the boundaries between entertainment, politics, and finance," and added, "Accordingly, the SEC is in a situation where it must choose whether to strengthen regulations further or prepare clearer guidelines to adapt to reality."

○ Strengthening Regulations in Korea

There are signs that meme coin regulations will be strengthened in Korea as well. The Financial Services Commission announced that it would specify listing requirements for poor-quality coins like meme coins. These requirements consist of the reliability of the issuer, user protection measures, technology and security, and compliance with laws, focusing on verifying the non-disclosure of digital assets and the issuer's wallet information. A Financial Services Commission official explained, "Whether to utilize existing regulations or introduce meme coin-specific guidelines will be discussed later."

Jin Jeong / Mi-hyun Cho justjin@hankyung.com