Hester Peirce, the newly installed chief of the Securities and Exchange Commission’s (SEC) crypto task force, has shaken up the crypto space by proposing that meme coins, including TRUMP, are probably beyond the jurisdiction of the SEC. The jurisdiction of the SEC has been a contentious issue, especially with the increasing popularity of meme coins. These coins are typically founded on internet memes, trends that go viral, or even celebrities like popular personalities, and thus are distinguishable from other more conventional digital currencies such as Bitcoin or Ethereum. Peirce’s statements are a pointer towards the shift in regulatory gears, particularly since the SEC considers the space for cryptocurrencies anew.
Commissioner Peirce was interviewed by Bloomberg on Tuesday and was asked if meme coins related to President Donald Trump and his wife Melania Trump, namely the TRUMP and MELANIA tokens, would be under the SEC’s umbrella. These tokens were released on the Solana platform prior to Trump’s inauguration, with Melania issuing her own coin soon afterward.
Peirce’s answer was definitive and rather astonishing to many in the crypto community: such tokens probably do not come within the SEC’s area of regulation. “There are a lot of folks launching meme coins these days,” she said. “But a lot of the meme coins that exist probably don’t have a place in the SEC under our present regime of regulations.”
Her words carry serious consequences for the future of meme coins, particularly those that are made hastily with nothing more than a joke or a viral meme in mind. To put things into perspective, meme coins are usually cryptocurrencies that are conceived out of internet culture, frequently with humorous, irreverent themes and sometimes based on memes or pop culture references. Whereas well-established currencies like Bitcoin or Ethereum are not regarded by many as highly speculative, meme coins are viewed by most as speculative. Their prices can also shift drastically. The investors in such coins can gain enormous amounts when the popularity of the coin picks up, but they can lose huge amounts of money when popularity declines, or when the price of the coin plummets as fast as it climbed.
For example, TRUMP, which is the token representing Donald Trump, reached a new high of more than $73 a day ahead of the inauguration of the former president. Yet in the months that have followed since its release, its value has plummeted. Currently, TRUMP is valued at only $15.42, down by almost 80% from its all-time high, as per the data provided by CoinGecko. The unpredictability of such tokens, as alluring as they are to some risk-tolerant investors, is suspect when it comes to their validity and whether or not they can be considered alongside other assets in the view of oversight agencies like the SEC.
The SEC’s role has come into the spotlight as cryptocurrencies have become more mainstream. Meme coins, being highly speculative in nature, tend to not have the traits of traditional securities, and therefore, it becomes a question of how they are regulated. Peirce’s remarks indicate that, according to the existing framework, most of these meme coins would not be classified as securities, and thus would not be under the SEC’s authority.
This view is part of a larger regulatory philosophy that Peirce has advocated for some time. Popularly known as “Crypto Mom” because of her more positive approach to the industry, Peirce has long contended that the SEC should not suppress innovation in the crypto market. Rather, she thinks that the government’s role should be to enable Americans to experiment with new technologies without excessive interference. “Seeing what’s occurred with crypto over the last few years has just been so frustrating as an individual who thinks that government is supposed to work for the American people, not hinder them when they’re experimenting,” Peirce stated in her interview.
SEC Chair Gary Gensler under President Joe Biden
Compared to the more aggressive regulatory strategy pursued during the tenure of former SEC Chair Gary Gensler under President Joe Biden, Peirce’s position has been viewed as more conciliatory. During Gensler’s tenure, the SEC pursued a progressively hardline stance against crypto firms, often suing large companies alleged to have sold unregistered securities. The Biden administration’s aggressive approach towards the industry set alarm bells ringing among industry participants, who felt that excessively tough regulations would put a brake on the development of digital assets in the U.S.
Peirce’s leadership of the SEC’s newly created crypto task force can potentially make the regulatory debate more crypto-friendly. Her perspective is different from that of Gensler, who has emphasized holding the SEC’s rules accountable, especially for tokens that have the characteristics of more traditional securities. Peirce, by contrast, is looking to see how to learn more about the space, with an eye toward regulating that doesn’t unnecessarily suppress innovation. Though she has made clear that she is not a crypto industry supporter, she is indeed a “freedom maximalist” who is calling for little government interference with new technologies.
The increasing popularity of meme coins and the emergence of characters like Trump’s Solana-based TRUMP token only add fuel to the argument surrounding the treatment of cryptocurrencies by regulators. Meme coins, which sometimes are established just for fun or as a piece of viral web fad, are less likely to have the tangible utility many of the older-established cryptocurrencies enjoy. The SEC hasn’t yet written off regulating meme coins, though, if they exhibit the qualities that put them more squarely in the camp of traditional securities.
Meanwhile, Peirce’s remarks indicate the SEC’s awareness that the regulatory landscape for crypto is still in development. While it’s certain that more established assets such as Bitcoin and Ethereum will be within the agency’s jurisdiction, the categorization of newer and more speculative coins remains a grey area. If meme coins such as TRUMP were to be regulated as securities, it would potentially unleash a Pandora’s box of regulatory problems, particularly considering how rapidly they are issued and how frequently they are attached to transitory internet fads.
This change of heart is also part of a larger discussion regarding how the U.S. will regulate cryptocurrency. With President Trump having made positive comments about the space and vowing to assist it in thriving, Peirce’s more laissez-faire stance may be a central component of this new regulatory environment. The test will be to balance encouraging innovation with safeguarding investors from potentially hazardous volatility, especially as meme coins continue to grow in popularity.
Finally, Peirce’s remarks indicate that the SEC’s regulatory stance on cryptocurrencies will be more sophisticated in the future. Although meme coins such as TRUMP and MELANIA may not be regulated by the SEC currently, it’s apparent that regulators are keeping a close eye on the changing crypto space. The question now is how the SEC will work through the intricacies of this new digital economy and what regulatory conclusions will come out of the agency’s continuing efforts to grasp and regulate this fast-expanding industry.
