"Believed it was a famous celebrity"... Turned to dust in minutes

The Two Faces of Meme Coins - (Part 2) Emerging as a New Fraud Tool

Global Market Cap 15.3 Trillion Won '442% Surge'

Last Year's Trading Volume Increased 13 Times in a Year

Fake Imitations of 'OfficialTrump' Appear

'Memes' Issued by Celebrities and Influencers

Plummeted in Minutes, Investigated for Fraud Allegations

User Protection Measures in Korea

'Regulatory Guidelines' Discussions Intensify

1. On the 18th, Donald Trump, the President of the United States, issued his meme coin 'OfficialTrump'. Two days later, his wife Melania Trump also released 'OfficialMelaniaMeme'. In just a few days, 61 fake meme coins imitating the Trumps' meme coins appeared.

2. Last year, a developer who evoked sympathy by claiming to have "no arms" introduced the HANDS meme coin. This coin quickly attracted a large amount of investment, reaching a market cap of $550,000 at one point. The developer's claim was revealed to be false, and as he sold his share of the meme coins for profit, the coin's price plummeted. The loss was entirely borne by the investors.

Meme coins, which are drawing funds in the cryptocurrency market, have emerged as a new means of fraud. They cleverly exploit the speculative psychology of humans aiming for a jackpot. There is even an analysis that 97% of meme coins that appeared in the real world have become worthless.

○ Encouraging Speculative Psychology

According to CoinMarketCap on the 23rd, the market cap of meme coins listed on global cryptocurrency exchanges was 15.2 trillion won as of 9 a.m. that day. Compared to January 24 last year (2.8 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) increased from 2 trillion won to 27 trillion won.

Meme coins listed on cryptocurrency exchanges have at least passed listing criteria such as public support from each exchange. However, according to Binance, 97% of meme coins 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. On the meme coin creation platform PumpFun, about 50,000 meme coins are generated in 24 hours.

Meme coins are created inspired by internet humor, jokes, images, etc., so they have no intrinsic value. They differ from other cryptocurrencies that try to gain public trust by disclosing clear development entities, technical capabilities, and future utilization plans. Because they have no value, their price volatility is also very high.

○ Meme Coins Enter 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 3 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 immediately after launch, but it dropped to $400,000, a tenth, in just a few minutes. There is also an analysis that one in six meme coins is a blatant scam coin targeting investors' money.

There is also a view that the launch of meme coins by the Trumps has brought meme coins into a new phase. It is expected that the U.S. Securities and Exchange Commission (SEC) regulations will be strengthened. Virtual asset expert Andy Lian diagnosed, "The launch of the president's meme coin has blurred the boundaries between entertainment, politics, and finance," and "As a result, the SEC is in a situation where it must choose whether to strengthen regulations further or prepare clearer guidelines to adapt to reality."

○ Regulatory Strengthening Moves 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 the listing requirements for poor-quality coins like meme coins. The requirements consist of △the reliability of the issuer △user protection measures △technology and security △compliance with laws, focusing on checking the non-disclosure of digital assets and the issuer's wallet information. A Financial Services Commission official explained, "Whether to use existing regulations or introduce guidelines dedicated to meme coins will be discussed later."

Jung Eui-jin/Cho Mi-hyun justjin@hankyung.com