Concerns have been raised by financial analysts regarding Davido’s recently launched meme coin, emphasizing the potential risks involved.
The entry of this coin into the market has initiated discussions within financial circles.
Experts have drawn parallels to past Ponzi schemes like MMM, which resulted in significant financial losses for many investors.
Analysts have pointed out that such coins often rely on the popularity of individuals without having strong foundational principles or a clear business strategy.
Vincent Nwani, a financial analyst, expressed concerns about the adverse impacts the proliferation of such a coin could have on the Nigerian financial system.
He expressed, “Although I am an admirer of Davido, his music, and his family, appreciating his noteworthy contributions to the Nigerian entertainment scene, I find the recently launched Davido coin somewhat excessive due to its resemblance to previous Ponzi schemes that have afflicted our economy.”
Nwani highlighted Davido’s fame and dedicated fan base as the main factors driving the perceived value of the coin.
“There are several reasons for my thoughts on this. Firstly, the operation of the coin appears to be founded on Davido’s fame, with a belief that the platform could effectively utilize his brand. Allowing such a coin to gain traction may encourage other popular personalities in Nigeria to follow suit, inevitably leading to instances of exploitation. Undoubtedly, this scenario poses risks to the Nigerian financial system.
“The debacle of MMM is still fresh in our memories. Approximately N18bn was lost by three million Nigerians to MMM, and this scenario must not be repeated.”
The Securities and Exchange Commission has noted that the meme coin lacked regulatory approval and warned market operators against engagement with it.
Ambrose Omorodion, another financial analyst, advised individuals lacking financial expertise to refrain from investing in cryptocurrencies. He added that the SEC would not pursue legal actions if investors incurred losses.
“In the financial realm, we seek a broader range of investment options. However, meme coins are inherently risky, which explains the SEC’s cautionary stance.
“Given the emergence of cryptocurrency on the global stage, there has been an increase in participation; yet, my counsel is that individuals without sufficient financial knowledge should steer clear of such investments. The SEC will not litigate against companies in the event of investor losses,” he elaborated.