Sitting on its handsThe frenzy over Dogecoin, an open-source digital currency created as a joke in 2013, in Korea has outperformed its global splash following mentions from celebrity-like figures including Elon Musk. Its 24-hour trade topped 17 trillion won ($15 billion) on Saturday, exceeding daily turnover of 15 trillion won on the main Kospi bourse. The rush to meme coin pushed its value at 60 won earlier this month to a peak of 540 won. It now trades at 460 won. After the crypto icon Bitcoin neared 80 million won per share, money is pouring into “altcoin,” or virtual money other than Bitcoin.
Even without the repeated warnings from central banks in the U.S. and elsewhere, the craze over Dogecoin raises serious concerns. Unlike Bitcoin with a cap on supply and requirements for digital pay, Dogecoin can still be mined. But it lacks intrinsic value and can only stoke speculation.
Since its buying is merely driven by the self-reinforcing factor to sell it for a profit, many could be burned if the value crumbles. Apart from the fact that the Shiba dog badge coin has the love of Elon Musk and other fans of meme culture, there is no other element that can support its long-term value.
A crypto crash after a debt-financed buying spree by those in their 20s and 30s could have serious ramifications on society. Japan has provided minimum protection by allowing only authorized cryptocurrencies to trade on exchanges. But since Korea leaves it to exchange operators to list or remove the coins, many could find themselves empty-handed.
The government has so far kept to the sidelines. Even as it readies to tax capital gain, it has neglected protecting investors on the grounds that cryptocurrencies are not a legitimate investment product. The government has not entirely condoned cryptocurrency as future assets. After warnings about overheating, it has launched a pan-government crackdown on illicit activities on crypto trade. Its act constitutes negligence of duty.
The United States has allowed crypto exchange Coinbase into the mainstream by allowing it to go public on the Nasdaq last month. But authorities including the Fed chair, treasury secretary and even the president keep on warning against speculative activities and tend to investor protection. Investors should be first liable for their investment, but the financial regulator must not neglect their protection.