On Thursday, the US Securities and Exchange Commission (SEC) issued new security guidance, highlighting meme coins’ security flaws, making the new SEC Meme coin legal announcement as the latest implications on the crypto market’s volatility, making traders aware of the coin’s risks.
The lack of security in meme coins has triggered investor concerns, as federal securities laws do not recognize such tokens, leaving transactions unprotected. So, are meme coins legal in the eyes of the SEC?
SEC Meme Coin Regulations
The SEC’s stance on crypto exchange for meme coins has shifted under new Chairman Mark Uyeda. Previously, under his predecessor, former Chairman Gary Gensler, meme coins and other cryptocurrencies were classified as securities, requiring companies to register with the SEC.
Now, with the Chairman Uyeda, a meme coin in crypto ecosystem doesn’t generate earnings or grant rights to future distributions, therefore they are distinct from securities.
Despite the SEC’s authority, to invest in meme coins means investing in a highly unstable fraction of the cryptocurrency market. These coins lack inherent value, with prices fluctuating based on social media trends and the internet.
According to The Telegraph, President’s Donald Trump meme coin, $TRUMP, soared drastically after its January 19 launch, but lost $12 billion within days.
Experts warn that meme coins are investors’ biggest threat, considering many buy at peak prices only to suffer massive losses when values plummet. Therefore, meme coin investing has faced requests for regulations to protect investors from financial loss.
Reactions Over Donald Trump Meme Coin
Rep. Sam Liccardo, a Democratic congressman from Silicon Valley, introduced the Modern Emoluments and Malfeasance Enforcement (MEME) Act, potentially as a response to the release of President Trump’s meme coin.
“That behavior is so self-evidently unethical that it raises the question why isn’t there a clear enough prohibition,” Liccardo said.
The proposed Act would prohibit public officials from issuing or marketing meme coins and cryptocurrencies, as well as requiring President Trump to return any profits from his meme coin sale. While the Act has little chance of being passing as a Bill in the Republican-controlled Congress, Liccardo views it as a symbolic stance against potential corruption in the crypto market.
After the launch of the Donald Trump meme coin, over 700 copycat coins using Trump’s family name flooded the market, with spam coins increasing investors’ uncertainty, as they lack federal protection.
Eswar Prasad, senior fellow at the Brookings Institution and an economics professor at Cornell University, told the Financial Times that Trump’s meme coin has opened the door for hackers to exploit data in meme coins, turning it a cybersecurity problem.
Final Thoughts
The debate over meme coins is a critical issue waiting to be resolved to protect investors’ security and transparency. As the SEC Meme coin Act is fairly on its way to imposing scrutinizing regulations, the US government should step in to limit unethical practices threatening the national economy and its own people.
On top of it, President Trump’s deep involvement in the meme coin market, alongside his biggest ally in the tech world, Elon Musk with his DOGE coin, is yet another question mark for investors and experts alike concerning crypto’s future under his presidency. President Trump has already set high expectations before even taking office.
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