Author: Zoltan Vardai, CoinTelegraph; Translator: Baishuai, Jinse Finance
Memecoins were once seen as community-driven digital assets, but are increasingly being used to exploit retail investors, with a growing number of scams and celebrity-backed tokens failing, raising regulatory concerns.
The collapse of the Libra (LIBRA) token, with a market cap of $400 million, is the latest blow to the industry, after eight internal wallets cashed out $107 million in liquidity, causing its price to plummet 94% within hours of launch.
Anastasija Plotnikova, co-founder and CEO of blockchain compliance firm Fideum, said the rise of scams associated with memecoin has posed a significant regulatory challenge.
Plotnikova pointed out: "Memecoins have evolved from community-driven social experiments to a chaotic landscape dominated by the extraction of value from retail investors," and added:
"Insider circles, pump-and-dump schemes, and hunting groups have replaced the organic and collectible nature of the original memecoin, creating an unhealthy competitive environment."
Investors also need to distinguish between memecoin that can be seen as true "collectibles" and "outright fraudulent activities" such as rug pulls, the latter of which "are not only unethical, but also clearly illegal, with case law supporting enforcement."
"In my view, these activities should be squarely within the jurisdiction of law enforcement agencies," she added.
Since the collapse of the Libra token backed by Milei, there have been more disturbing disclosures, particularly that Libra was an "open secret" in the memecoin insider circle, and some members of the Jupiter decentralized exchange knew about the token's issuance two weeks in advance.
Memecoin Scandals Unlikely to Impact US Crypto Legislation
Dmitrij Radin, founder of Zekret and chief technology officer of Fideum, said that while the recent memecoin crashes have had a negative impact on investor sentiment, in the long run, they are unlikely to affect the emerging regulation of cryptocurrencies.
He pointed out that this is because cryptocurrency legislation is being developed from a "long-term" perspective, and not just based on recent events.
It is also worth noting that the appeal of Libra is different from the launch of the official TRUMP and official Melania Meme (MELANIA) tokens, the latter two of which are unlikely to trigger a regulatory reaction in the US, Radin said, adding:
"As US crypto czar David Sacks mentioned, Memecoins are more like collectibles. So they shouldn't be regulated as securities or the like."
"That's why I believe the Trump and Melania tokens may be accepted differently than Libra," he added.
