The U.S. Securities and Exchange (SEC) Commission, on February 27, under the Division of Corporate Finance, announced that meme coins are not securities, claiming that they don’t have any underlying value or function.
Caroline Crenshaw, SEC Commissioner and Democrat, disagreed with the conclusion, claiming that the agency is overstepping its jurisdiction and should not exclude meme coins from SEC oversight. Crenshaw further argues that the SEC has not provided an adequate definition of a meme coin, let alone made an argument for rejecting them as securities.
“The guidance offers no clear definition”, said Crenshaw, “from law or even a basic dictionary. It generally describes a meme coin as an asset reflective of online or social trends, of speculative value, that tends to experience high volatility. But these are near universal hallmarks of crypto assets”.
The Division of Corporate Finance reasoned that meme coins are mainly driven by speculation, trends, and social media promotion, whereas traditional securities like stocks and bonds are driven by part ownership in a company and income derived from dividends. The division also concerned itself with the criminal element surrounding meme coins, requiring other agencies, rather than the SEC, to monitor such issues.
Meme coins are cryptocurrencies created as internet memes or jokes. They are often spread through social media as trends, but they fundamentally hold no real world value. Owners typically buy meme coins for fun or speculation.
“In this regard, meme coins are akin to collectibles,” said the SEC division, having “limited or no use or functionality”.
“Given the speculative nature of meme coins, they tend to experience significant market price volatility, and often are accompanied by statements regarding their risks and lack of utility, other than for entertainment or other non-functional purposes”.
Recent examples of meme coins include $TRUMP and $MELANIA tokens, inspired by the Trump presidential campaign. These tokens hope to take advantage of the recent hype surrounding U.S. politics, but they only reinforce how absurd the concept has become, holding no intrinsic value at all.
Since the concept started, there has been an explosion of meme coins. The tokens often have no underlying value and are of little use as cryptocurrencies. In this respect, they do seem to resemble trading cards or other types of collectibles.
The SEC’s announcement comes as politicians are trying to introduce regulations against creating meme coins. Californian politician Sam Liccardo aims to prevent elected officials from launching or promoting meme coins. The move comes in response to the Trump token, which oscillated wildly and could be used by politicians to enrich themselves and defraud the public.
