[Column] The Libra incident once again reminds us of the uniqueness of the coin market

These days, the ‘LIBRA incident’ is one of the biggest topics in the coin industry. There is even talk that a cold chill is once again circulating in the coin market due to this incident.

Immediately after the launch of Libra Memecoin* on February 14, Argentine President Javier Millais publicly supported Libra on his social media. Immediately after Millay's post, the price of Libra seemed to soar, but it plummeted shortly thereafter. It was a sharp drop of 94% from the highest price. As expected, I wasn't living by listening to what my acquaintances said...

*Meme coin: A cryptocurrency created inspired by Internet memes or trends, the price of which fluctuates based on community and trends rather than technical value.

In the coin industry, there are suspicions of insider trading over the Libra incident, and Hayden Davis, CEO of Kelsier Ventures, an investment company that led the Libra project, said immediately after the incident regarding insider trading suspicions, "Insider trading in memecoins is not illegal, and in fact, all KOLs around the world make money that way," and the controversy intensified.

Hayden Davis is not necessarily wrong in this statement; it is still in a gray area of ​​uncertainty as to whether Memcoin is subject to insider trading regulations.

In the United States, when the Securities and Exchange Commission (SEC) classifies an asset as a security, insider trading is regulated under securities laws, so there may be discussion about whether MEMCOIN is a security. Related controversies have already continued through the ‘Ripple Incident’ and the ‘Terraform Labs Incident’.

If Korean law is applied, MEMCOIN will be defined as a 'virtual asset' under the Virtual Asset User Protection Act, making insider trading illegal.

According to the Virtual Asset User Protection Act, ‘virtual assets’ refer to electronic tokens that have ‘economic value’ and can be traded or transferred electronically. Non-fungible electronic tokens, such as NFTs, that are mainly for collection are excluded from virtual assets, but can be recognized as virtual assets if they can be used as a means of payment for specific goods or services.

Hayden Davis emphasized that Memcoin, unlike other virtual currencies, has no ‘practicality’.

In reality, meme coins have significantly lower practicality and usability and are mainly used for speculation, investment, or participation in specific communities. Therefore, some believe that because meme coins are rarely used as currency, they are excluded from virtual assets, such as NFTs, which are for collection purposes.

However, the 'economic value' mentioned in the Virtual Asset User Protection Act cannot necessarily be seen as including practicality, and in fact, even if it is a meme coin, some, such as Dogecoin, are used as a payment method in online shopping malls or for donation activities. In other words, as long as it is a 'coin', the practicality itself exists, even if the level may be low.

In addition, as long as MEMCOIN is actively distributed in the coin market for investment purposes, it is clear that it is a virtual asset with economic value under the Virtual Asset User Protection Act.

MEMCOIN is a new type of asset that does not exist in the existing financial market. In a situation where even existing cryptocurrencies have not established a clear position in the traditional financial market, the boundaries of MEMCOIN are even more ambiguous.

In this situation, Hayden Davis claimed that "Memcoins are 'impractical'" and "insider trading is allowed," sparking discussion about the nature of Memcoins.

In many ways, the Libra scandal raises important questions about how the crypto market operates and the direction of regulation, and will serve as another opportunity for future market changes. And in the ever-changing virtual currency market, I once again reminded myself that investing based solely on what others say can be quite risky.

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[Column] The Libra incident reminds us of the uniqueness of the coin market (link)