Libra Token Collapse Leads to Calls for Stricter Political Memecoin Regulations
1min read Industry experts have called for stricter regulations on political memecoins following the collapse of the Libra token, which was endorsed by Argentine President Javier Milei. The token experienced a significant market cap wipeout of $4 billion due to insider cash-outs, leaving investor sentiment shaken. According to blockchain analytics firm DWF Labs, at least eight insider wallets withdrew $107 million in liquidity, triggering the massive collapse.
To prevent similar meltdowns, tokens endorsed by high-profile leaders need more robust safety and economic mechanisms. These could include liquidity locking or making tokens in the liquidity pool non-sellable for a predetermined period. Additionally, launch restrictions are necessary to limit participation from crypto-sniping bots and large holders or whales. Andrei Grachev, managing partner at DWF Labs, emphasized the importance of limiting bot and whale activity to ensure a fair launch where all participants have an equal opportunity to secure an allocation.
The Libra scandal resulted in significant losses for traders, with around 74,698 traders losing a cumulative $286 million worth of capital. The token’s quick meltdown highlighted the need for liquidity locking, which ensures sufficient liquidity for users to buy and sell without high slippage, especially during the launch phase when volatility is high.
DWF Labs’ report comes in the wake of legislation introduced by New York lawmakers aimed at protecting crypto investors from rug pulls and insider fraud. The Libra token’s meltdown underscores the necessity for more transparent token launch mechanisms, including pre-launch wallet transparency and better due diligence by launchpads on the projects they partner with. This transparency can empower users to make more informed decisions, mitigating some of the risks associated with token launches.
Ask Aime: What are the potential long-term effects of the Libra token's collapse on the cryptocurrency market?
Since the meltdown of the memecoin endorsed by the Argentine President, troubling developments have emerged. It has been revealed that Libra was an “open secret” in some memecoin circles, with knowledge of the token’s launch up to two weeks ahead. President Milei has requested the Anti-Corruption Office to investigate all government members, including himself, for potential misconduct. This move comes amid impeachment calls from his political opponents following his endorsement of the cryptocurrency that turned into a $100 million rug pull.
