The Financial Supervisory Service recently issued guidance for investors in decentralized exchanges (DEX) and urged extreme caution as scams involving "meme coins (hype-driven virtual assets)" have followed false good news.
A decentralized exchange is a venue where users trade directly without a separate operator, and unlike a centralized exchange (CEX), there is no know-your-customer (KYC) or listing review process, lowering the initial entry barrier. But because anyone can easily issue a coin, it has become a hotbed for "rug pull" scams, where developers raise investment funds and then sell their holdings when the price spikes, and for crimes involving copycat coins.
In fact, in May, a group that artificially spiked the price of a meme coin and then dumped its holdings all at once, swindling 900 million won from 256 investors, was indicted by prosecutors. The Financial Supervisory Service said, "Rug pull scams occur in the early days of DEX listings and social media is widely used," and noted, "Investors should check the coin's basic information and closely review rug pull risk indicators, such as concentration among top holders."
The Financial Supervisory Service also explained that, with coin-issuance platforms becoming mainstream, tens of thousands of meme coins are being churned out daily even without code development. In reality, the number of coin types traded last year surged to 20 million, but 53.2% of them have already stopped trading.
Accordingly, when investing in meme coins, investors must thoroughly verify the coin they intend to buy by checking the contract address (CA), the unique identifier of a given coin, the Financial Supervisory Service emphasized.
Sharp price volatility due to a lack of liquidity is also a concern. Because decentralized exchanges automatically set prices based on quantity ratios between virtual assets, investors may incur losses from "slippage," where orders are executed on worse terms than the expected price at the time of the order. The Financial Supervisory Service advised investors to check the size of the liquidity pool and whether the asset is listed on other exchanges before investing, and to set appropriate slippage tolerances.
In addition, because decentralized exchanges operate solely through automated code without an operator, it is practically impossible to obtain relief for damages, as it is difficult to identify a responsible party even in cases of hacking or asset theft. The Financial Supervisory Service recommended revoking transaction approval permissions for wallets that are not used often and separating wallets into long-term holding and short-term trading.