Memecoin Not Considered a Security, What’s the Impact? Here’s the SEC’s Explanation!

Jakarta, Pintu News – Memecoin, often regarded as a less serious cryptocurrency, has recently received important recognition from the United States Securities and Exchange Commission (SEC). The SEC has stated that in general, memecoin does not meet the criteria for being a security under federal law. This decision opens up a wide range of implications for the crypto market and investors.

Memecoin and Federal Securities Law

Memecoins are usually inspired by internet memes, cultural phenomena or current events. The SEC asserts that memecoins have no substantial function other than entertainment, which makes them different from traditional investments such as stocks or bonds. The value of memecoins depends largely on market demand and the speculative behavior of traders.

Because memecoins do not generate income or confer rights to profits or assets, the SEC concluded that transactions involving memecoins do not fall under the offer and sale of securities. This means that memecoins are not bound by the same regulations that govern other securities.

Howey Testing and Memecoin Classification

The SEC uses the Howey test to determine whether an instrument can be classified as a security. This test looks at whether there is an investment in a business with the expectation of profits coming from someone else’s business. In the case of memecoins, the buyer is not considered to be investing in a venture as there is no active management aimed at generating profits from the investment.

The value of memecoin arises from speculative trading and public sentiment, not from management or development by promoters. Therefore, the SEC confirms that memecoin does not meet the criteria as an investment contract under federal law, although any memecoin offering that deviates from these characteristics will remain under special review.

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Law Enforcement against Fraudulent Activities

Although memecoins are not considered securities, the SEC emphasizes that fraudulent activities related to the sale of memecoins can still be pursued under other federal or state laws. This means that market participants should remain vigilant against potential fraud and ensure that they comply with all applicable laws.

The SEC will continue to monitor the memecoin market and is prepared to take action against offerings that attempt to evade securities laws by masquerading as memecoins. This demonstrates the regulator’s commitment to protecting investors and the integrity of financial markets.

Conclusion

While the SEC’s decision may provide some relief to developers and traders of memecoin, it is still important to understand that this market remains high-risk and highly volatile. Investors are advised to do their due diligence and consider the risks before engaging in memecoin trading.

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This content aims to enrich readers’ information. Pintu collects this information from various relevant sources and is not influenced by outside parties. Note that an asset’s past performance does not determine its projected future performance. Trading crypto carries high risk and volatility, always do your own research and use cold hard cash before investing. All activities of buying andselling Bitcoin and other crypto asset investments are the responsibility of the reader.

Reference

• NewsBTC. Major Win for Memecoins: SEC Affirms They Typically Do Not Qualify as Securities. Accessed on February 28, 2025
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