Should the US Securities and Exchange Commission Be Responsible for Regulating Memecoins?

Probably not, says Hester Peirce.

The US Securities and Exchange Commission is unlikely to regulate memecoins, according to SEC Commissioner Hester Peirce.

In a Bloomberg interview on Tuesday, Peirce addressed the issue of memecoins, which have remained largely unregulated despite amassing a $75 billion market.

“It depends on the facts and circumstances,” Peirce said. “Many of the memecoins that are out there probably do not have a home in the SEC, under our current set of regulations.”

Many have argued that memecoins are not securities, which would exclude them from the SEC’s regulatory purview.

That doesn’t necessarily mean memecoins will never be regulated, just probably not by the SEC.

“Maybe that's something the Commodity Futures Trading Commission wants to address,” Peirce said, adding that Congress could also step in to address the issue of memecoin regulation if it wanted to.

Peirce’s comments come amid controversy over the launch of official memecoins by former President Donald Trump and his wife Melania last month. Some expressed disbelief that the president would involve himself in a market known for its extreme price volatility, joke coins, and scammers.

The TRUMP token soared to a $15 billion market valuation before crashing 79%, leaving investors stranded. Melania’s token fared even worse, losing 89% of its value.

Memecoins have surged in popularity over the past year and a half. Such tokens, which are usually based on a popular figure or online meme, often explicitly detach themselves from any promise of gaining value.

The Trump memecoin, for example, states on its website that it is intended to function as an expression of support for the president and not an investment.

Even so, risk-tolerant investors routinely pile into memecoins like TRUMP due to their extreme volatility and the potential for buyers to make life-changing money quickly.

Peirce, who was tapped last month to lead a new crypto task force that will create bespoke regulations for digital assets, has quickly become one of the most influential voices in U.S. crypto regulation.

Earlier this month, she set the tone for Trump administration crypto regulation by saying the SEC won’t bail out rash investors.

“If people want to buy a token or product that lacks a clear long-term value proposition, they should feel free to but should not be surprised if someday the price drops,” Peirce said in a policy statement published Feb. 4.

“People must decide for themselves, not look to Mama Government to tell them what to do or not to do, nor to bail them out when they do something that turns out badly.”

In the same Bloomberg interview, Peirce also commented on the SEC’s previous approach to regulating crypto, which she has long criticized.

“We’ve just put up roadblock after roadblock against people who are just trying to come in and talk to us as we have asked them to do,” she said, referring to former SEC Chair Gary Gensler’s call for crypto firms to engage with the regulator.

Despite Gensler repeatedly requesting crypto firms to engage with the SEC, many — such as US exchange Coinbase — say that the regulator had been reluctant to work with them.

“All I’m asking is that we have an innovation policy that allows people to innovate and allows people to try new things,” she said.