The U.S. Securities and Exchange Commission (SEC) made a significant announcement in a highly anticipated staff statement on Thursday, clarifying that the much-discussed "memecoin" should not be considered securities, but rather closer to collectibles. This statement not only provides new guidance for the regulatory direction of the cryptocurrency market but also marks a significant shift in the SEC's attitude towards digital asset regulation. As a bellwether for global financial markets, this decision quickly sparked widespread discussion both within and outside the industry.
Defining Memecoin: From Meme to Market Craze
The SEC's Division of Corporation Finance defined memecoin in the statement as "a type of crypto asset inspired by internet memes, characters, current events, or trends, with the intent of attracting enthusiastic online communities to buy and trade." This description accurately captures the core characteristics of memecoins—they are often closely tied to popular culture and are more a product of community sentiment and speculative enthusiasm than traditional financial instruments. For example, tokens like Dogecoin or various meme-based tokens that have emerged in recent years often experience dramatic price fluctuations due to social media hype, yet they rarely have substantial technological functions or long-term value support.
The statement noted that because memecoins have "limited or no utility or function," they do not meet the classic definition of "securities" under U.S. securities law—defined by the landmark 1946 case SEC v. W.J. Howey, known as the "Howey Test." This test requires that an asset be considered a security if it meets four conditions: an investment of money, a common enterprise, an expectation of profits, and profits primarily derived from the efforts of others. The SEC believes that trading memecoins is more akin to purchasing baseball cards or limited-edition dolls, with investors' interest stemming more from entertainment or collection rather than a reasonable expectation of corporate profits. Therefore, these assets fall outside the SEC's direct jurisdiction.
Hester Peirce's Push: From "Crypto Mom" to Policy Pioneer
This statement did not come out of nowhere; it is a formal response to comments made earlier this month by Hester Peirce, the head of the SEC's newly established crypto working group. Peirce, nicknamed "Crypto Mom" by the community for her friendly attitude towards crypto innovation, stated in a Bloomberg TV interview: "Many memecoins in the market may not fall under the current regulatory framework of the SEC." She further wrote in a crypto regulatory roadmap released in early February: "If people want to buy tokens or products that lack a clear long-term value proposition, they should have that freedom. But if the price crashes one day, they shouldn't be surprised."
Peirce's stance reflects a pragmatic and distinctly American regulatory philosophy. She emphasized that in this country, personal freedom coexists with personal responsibility: "People have the right to make their own decisions, but with that freedom comes the understanding that they cannot expect the government to rescue them when they make poor choices." This "risk-bearing" attitude is both a calm observation of the speculative frenzy in the crypto market and sets the tone for the SEC's regulatory strategy in the new era.
As the head of the crypto working group, Peirce has been dedicated to pushing the SEC to shift from its past "enforcement-first" regulatory model to a more forward-looking and clearer rule-making approach since the group's establishment in January. Her efforts have been supported by the current acting chair, Mark T. Uyeda, who quickly initiated this group after taking office, promising to "develop a comprehensive and clear regulatory framework for crypto assets."
Regulatory Boundaries and Exceptions: Flexibility and Bottom Lines Coexist
Although the SEC has explicitly excluded memecoins from the category of securities, the statement also leaves room for enforcement intervention. The statement specifically noted that this position "does not apply to those memecoins that do not conform to the above definition or are intentionally labeled as 'memecoins' to evade securities laws." In other words, if a token masquerades as a memecoin but involves transactions of a securities nature, the SEC will still assess it based on "economic reality" and may take action.
This "exception clause" demonstrates that while the SEC is relaxing regulations, it remains vigilant against fraudulent activities. As stated in the announcement: "If the issuance or sale of a memecoin involves fraud, it may face enforcement actions or lawsuits from other federal or state agencies." This means that while memecoins themselves do not need to register with the SEC, and investors cannot rely on securities laws for protection, market participants must still remain sensitive to potential legal risks.
From SAB 121 to Memecoin Statement: SEC's Self-Correction
The release of this statement also brings to mind the SEC's tumultuous journey in crypto regulation in recent years. The Staff Accounting Bulletin No. 121 (SAB 121), issued in 2022, required banks to list customer-held crypto assets on their balance sheets, a guidance that was seen as a significant obstacle for the crypto industry, provoking strong backlash from bankers and practitioners. It was only after the current leadership took office and formally repealed SAB 121 that the industry was relieved. Now, the issuance of the memecoin statement is viewed as another attempt by the SEC to respond to market calls and adjust its regulatory strategy.
It should be clarified that this statement is not formal regulation but rather an "employee opinion" that lacks legal binding force. However, as the notorious SAB 121 demonstrated, such statements from the SEC often have far-reaching impacts on market behavior. Participants in the crypto industry, especially exchanges, project teams, and investors, are expected to closely monitor this position and reference it in future business decisions.
Market Reaction and Future Outlook: Freedom and Chaos Coexist?
The response from the crypto community following the statement has been mixed. On one hand, many practitioners welcomed it, viewing it as a rare concession from the SEC towards crypto innovation. After all, in recent years, under the leadership of former chair Gary Gensler, the SEC has launched lawsuits against multiple crypto companies, accusing them of engaging in unregistered securities offerings, a high-pressure policy that has left the industry feeling stifled. Now, the new direction under Peirce seems to inject a breath of fresh air into the market.
On the other hand, there are concerns that this decision may fuel speculative fervor. The memecoin market has surged in recent years, known for its extreme price volatility and varying project quality. For instance, the memecoins launched by Donald Trump and his wife Melania in January this year saw rapid price spikes shortly after launch, followed by significant declines, highlighting the irrational exuberance of this market. Whether the SEC's "hands-off" approach will allow more "air coins" to flood in, testing investors' judgment, remains to be seen.
Meanwhile, the U.S. Congress is also taking action. Reports indicate that Democratic lawmakers plan to introduce a bill prohibiting public officials (including the president) from issuing, sponsoring, or endorsing any securities, commodities, or digital assets, including memecoins. This legislative move echoes the SEC's statement, reflecting the government's delicate balance between encouraging innovation and preventing risks.
For investors, this may be an era that is both liberating and challenging. As Peirce stated: "In this country, people have the right to choose their own path, but they must also bear the consequences of their choices." Between the frenzy and calm of memecoins, this step by the SEC may just be the beginning of a long journey. The future path lies in the hands of the market.
Disclaimer: The above content does not constitute investment advice.
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