Is the SEC giving memecoins a green light? Atkins excludes them from securities regulation.

SEC Chairman Paul Atkins has reiterated that memecoins are not subject to U.S. securities regulation.

During a recent House Appropriations Committee hearing, SEC Chairman Paul Atkins reaffirmed that meme cryptocurrencies, inspired by internet culture, are not considered securities under US law, which means that they are not subject to the traditional regulation that applies to other financial assets. 

Atkins' recent statement gains relevance in a context where these digital currencies are gaining increasing popularity, especially those linked to public figures like President Donald Trump. As reported by this outlet, the US president launched his own memecoin, called Official Trump (TRUMP), which currently has nearly $2.800 billion in market capitalization. Its launch, as well as Trump's other activities in the crypto world, have sparked interest and concern, leading lawmakers to investigate the regulatory approach of agencies like the SEC toward the crypto market.

The SEC's stance on memecoins: A new regulatory approach

In February of this year, the SEC issued a release official statement clarifying that most memecoins do not constitute securities under current law. Atkins reiterated these statements based on the application of the Howey Test, which determines whether an asset is a security based on whether there is an investment in a company with a reasonable expectation of profits derived from the efforts of third parties. 

In the case of memecoins, the SEC argues that there is no common fund or corporate governance that generates profits for buyers, but rather Its value depends mainly on speculation and market demand., similar to collectibles. Furthermore, these coins often serve little or no practical purpose, and their purchase is more for cultural or entertainment purposes than for the expectation of financial return.

This position implies that memecoins do not require registration nor do they have to comply with the strict regulations applied to traditional securities, which is a relief for the developers and users of these assets. However, this also means that users of these cryptoassets are not protected by the agency. 

Additionally, the SEC cautioned that this does not exempt market participants from continually evaluating the economic nature of each memecoin, as some may have characteristics that classify them as securities. 

The Trump-backed memecoin case and the SEC's response

During the hearing, lawmakers addressed recent activity surrounding the memecoin named after President Trump, as well as Tron founder Justin Sun's involvement in the Trump-linked cryptocurrency firm World Liberty Financial (WLF). 

Maryland State Representative Glenn Ivey questioned these issues, emphasizing that the SEC had paused its investigations into Sun and his relationship with WLF and the TRUMP memecoin. Atkins responded by stating that the agency will investigate any potential wrongdoing related to this and other memecoins, but that the agency does not consider these coins to be securities under U.S. securities law.

This statement underscores the SEC's distinction between general market oversight and specific securities regulation, making it clear that the mere fact that a memecoin is associated with a well-known public figure or company does not automatically make it a regulated security. The investigation will focus on potential fraud or illegal activity, but will not apply the strict rules that govern the issuance and trading of securities.

This approach reflects a pragmatic stance that seeks to avoid regulatory overburden in an emerging sector while ensuring that unlawful conduct is addressed. In this way, the SEC maintains a balance between promoting innovation and protecting the market, adapting to market specifics.

Regulation in an evolving market

Since taking office as the new SEC chairman, Atkins has expressed his intention to regulate the cryptocurrency and digital asset market with clear and flexible principles, avoiding measures that could stifle technological innovation while ensuring the security and stability of users and investors. 

Unlike the previous administration, which prioritized a strict enforcement and sanctions strategy under Gary Gensler, Atkins proposes a more balanced approach that encourages technological innovation without sacrificing investor protection and stability.

Under his leadership, the SEC has begun to focus its efforts on creating a more transparent and adaptable regulatory framework that facilitates the issuance, custody, and trading of crypto assets. This responds to the need for a more dynamic and secure legal framework capable of driving the economic and technological development of the crypto industry while maintaining user confidence. The crypto community views this transition with optimism, anticipating a regulation that continually evolves to balance consumer protection with fostering innovation. 

The federal agency's new approach also includes the creation of specialized working groups that promote practical and effective regulation, reducing the uncertainty that characterized previous years. In short, the Atkins administration aims to position the United States as a global leader in the digital revolution, establishing a regulatory environment that promotes both the security and sustainable growth of the crypto market.

Investing in cryptoassets is not fully regulated, may not be suitable for retail investors due to high volatility and there is a risk of losing all invested amounts.