The US Securities and Exchange Commission (SEC) has announced that meme coins, a type of cryptocurrency inspired by internet memes and cultural phenomena, do not meet the requirements to be protected by federal securities law. In new guidance issued on Thursday, the SEC clarified that transactions involving meme coins do not need to be registered with the commission, as they are not considered securities.

According to the SEC, meme coins do not "generate a yield or convey rights to future income, profits, or assets of a business," which is a key characteristic of securities. Instead, the commission views meme coins as "more akin to collectibles" that have limited or no use or functionality. This decision could have significant implications for crypto regulations and may shield companies and individuals that create meme coins from potential litigation.

The rise of meme coins has been notable, particularly following Trump's election. The DOGE acronym for Trump's waste elimination agency was likely inspired by dogecoin, a popular meme coin that was enthusiastically supported by DOGE leader Elon Musk prior to his appointment. Trump and his wife Melania also launched their own respective meme coins in January, which have since plummeted in value.

The SEC's clarification could have a significant impact on the crypto market, as meme coins are often used in "pump and dump" schemes, where a token is artificially inflated via insider promotion to cash in on the buying frenzy. The digital currencies are known for their volatile price swings and are popularly used for entertainment, social interaction, and cultural purposes, with their value driven primarily by market demand and speculation.

The SEC emphasized that "meme coins typically are purchased for entertainment, social interaction, and cultural purposes, and their value is driven primarily by market demand and speculation. 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."

Industry experts are closely watching the implications of this guidance, as it could lead to a shift in the way meme coins are created, traded, and regulated. While the SEC's decision may provide some clarity, it also raises questions about the potential risks and consequences of treating meme coins as collectibles rather than securities.

As the crypto market continues to evolve, this development is likely to have far-reaching consequences for investors, creators, and regulators alike. With the SEC's guidance, the landscape for meme coins is likely to change, and it remains to be seen how this will impact the broader crypto ecosystem.