Financial analysts have raised concerns over Davido’s newly launched meme coin and warned about the associated risks.
The introduction of the coin into the market has sparked a debate within financial circles.
Experts have highlighted similarities to historical Ponzi schemes, such as MMM, where millions of investors lost substantial amounts of money.
Analysts argued that such coins often capitalise on the popularity of individuals without strong underlying fundamentals or a clear business model.
A financial analyst, Vincent Nwani, stated that if such a coin was allowed to flourish, it would negatively affect the Nigerian financial system.
He said, “To begin with, I’m a huge fan of Davido, his music, and his family, and I will continue to enjoy his tremendous contribution to the Nigerian entertainment industry. Notwithstanding, the recently launched Davido coin is a bit overboard for me because of its semblance to various Ponzi schemes that we have contended with in this economy.”
He noted that Davido’s celebrity status and fan base were the primary drivers of the coin’s value proposition.
“I say this for so many reasons. First, the workings of the coin seem to be conceived on the strength of Davido’s popularity, which he follows with a firm belief that the platform can successfully leverage his brand. If such a coin is allowed to thrive, what it does is that other popular personalities in Nigeria will quickly follow suit, and gross cases of abuse become inevitable. No doubt, this reality has a downside implication for the Nigerian financial system.
“The MMM experience remains so fresh in our minds. Three million Nigerians lost about N18bn to MMM, and this must not be allowed to happen again.”
The Security Exchange Commission has stated that the meme coin did not get regulatory approval and warned capital market operators not to associate with it.
Another financial analyst, Ambrose Omorodion, advised anyone without financial knowledge to avoid investing in cryptocurrency, adding that the SEC would not take the business to court if investors suffered losses.
“In the financial market, we need more products to fall into. However, meme coins are highly risky and I believe that is why the SEC came out to warn people that they are risky.
“Also, since cryptocurrency has emerged in the global space, I can see that people are now venturing into it, but my advice is that if they do not have the financial knowledge, they should not go into it or invest at all. The SEC will not sue the company if investors become victims,” he explained.