The Securities and Exchange Commission (SEC) issued pivotal guidance on Thursday evening, declaring that most meme coins do not qualify as securities under U.S. federal law. This announcement clarifies years of uncertainty surrounding these digital assets, which have surged in popularity following the election of President Donald Trump and experienced a recent market downturn. The guidance is expected to spur further investment in the U.S. crypto industry.
Meme coins, often characterized by their limited functionality, are likened to collectibles rather than traditional securities. The SEC’s Division of Corporation Finance stated that transactions involving these coins “do not involve the offer and sale of securities under the federal securities laws.” Consequently, individuals participating in the offer and sale of meme coins are not required to register their transactions with the Commission.
“It is the Division’s view that transactions in the types of meme coins described in this statement do not involve the offer and sale of securities under the federal securities laws,” – SEC’s Division of Corporation Finance
“Persons who participate in the offer and sale of meme coins do not need to register their transactions with the Commission…. Accordingly, neither meme coin purchasers nor holders are protected by the federal securities laws.” – SEC’s Division of Corporation Finance
Market Reaction
This news has already impacted the market positively. Shares of Coinbase and Robinhood saw a 1% increase in after-hours trading, while the token tied to Solana, a popular blockchain for launching meme coins, rose by 2%. Dogecoin, the original meme coin and currently the sixth largest cryptocurrency by market cap, experienced a 3% rise.
Brian Armstrong, CEO of Coinbase, supports the SEC’s stance, emphasizing that meme coins resemble collectibles. He acknowledged the impracticality of evaluating each one individually due to the sheer volume of tokens being created weekly.
“Given there are [about 1 million] tokens a week being created now, and growing… evaluating each one by one is no longer feasible,” – Brian Armstrong, Coinbase CEO
“And regulators need to understand that applying for approval for each one is totally infeasible at this point,” – Brian Armstrong, Coinbase CEO
Regulatory Clarity for the Crypto Industry
The SEC’s guidance arrives at a time when meme coins are traded three to four times more actively than other major cryptocurrencies like bitcoin and ether, adjusting for market cap. Despite their high risk, these digital assets offer lucrative opportunities for newcomers who feel they may have missed earlier cryptocurrency booms.
Industry experts view this regulatory clarity as a significant development. Ishmael Green, a crypto attorney and partner at Diaz Reus, stated that this guidance provides much-needed certainty for digital asset stakeholders.
“The SEC’s recent statement on meme coins is the clarity that the digital asset space has been demanding for years,” – Ishmael Green, crypto attorney and partner at Diaz Reus
Solana has emerged as a leading platform for launching meme coins over the past year, with many achieving multibillion-dollar market caps. This trend underscores Solana’s growing influence within the crypto space.
Author’s Opinion
This move by the SEC provides much-needed clarity for meme coin enthusiasts and investors. While the decision opens up more opportunities for the sector, it also underscores the inherent risks associated with such assets. With more regulatory certainty, however, the industry can build stronger foundations, attracting further investment and fostering growth.
Featured image credit: Marco Verch via Vecteezy
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