New York Department of Financial Services issues consumer alert on Memecoin, warning against “emotion-based virtual currencies”

The New York Department of Financial Services has issued a consumer alert warning against "emotion-based virtual currencies," or meme coins, highlighting their extreme volatility, lack of regulation, and high risk of fraud, including sudden pump-and-dump schemes. The department warned that these tokens are often controlled by a small group of insiders, created on unlicensed platforms, and are susceptible to severe price manipulation. The New York Department of Financial Services also said it has begun to pay close attention to meme coins, and as part of a scam, meme coin creators or insiders may engage in manipulative "wash trading" to create the illusion of rising prices due to market activity. It is often difficult for the public to tell which meme coins are manipulated, and consumers should be particularly wary of the recent surge in emotion-based currencies created through unlicensed platforms that allow individuals without technical expertise to create currencies with just a few clicks. Even on regulated platforms, the prices of meme coins are volatile and unpredictable, and can drop significantly in a short period of time.