Dubai’s Virtual Asset Regulatory Authority (VARA) has issued a warning to investors and consumers about the risks of memecoins, which are highly speculative and volatile assets often subject to market manipulation.
The Dark Side of Memecoins: Dubai Regulator Warns of Market Manipulation and Scam Projects
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Memecoin Issuers Face VARA Scrutiny
Dubai’s VARA has warned investors and consumers to be wary of advertisements promoting memecoins. In an alert issued Feb. 13, the regulator explained that memecoins are not only unregulated but also “highly speculative and volatile assets, frequently subject to market manipulation.”
VARA claimed that, unlike conventional assets, memecoins derive their pricing from social media trends, hype, or misleading promotional strategies. The alert urged investors to carefully examine memecoin advertisements before investing.
The warning by the Dubai regulator comes as incidents of unsuspecting users being lured into scam memecoin projects are rising. It also comes as some studies have shown that most memecoins die within weeks of launch.
As one the findings of one study suggest, many memecoin investors seemingly rely on social media influencers’ advice or endorsements. However, relying on their favorite social media celebrities has left many investors burned because many of the memecoins they hyped are now defunct.
A Bitcoin.com News report, based on a Coinwire study, said 76% of influencers on the social media platform X had promoted memecoins that are now dead. The study also found that 80% of memecoins promoted by influencers lost 70% of their value in just one week.
Meanwhile, the regulator said prospective memecoin issuers must adhere to VARA regulations and rulebooks if they wish to launch from Dubai. Memecoin issuers violating regulations will face enforcement action.
“Consumers and investors should be aware that access to memecoin platforms may be restricted without prior notice, and it is advisable to take necessary measures to safeguard personal financial security,” the regulator added.
