“More akin to collectibles”

Now that the SEC has determined that meme coins are “more akin to collectibles” and therefore not their problem, we are left with some questions. Who is responsible? Does anyone need to be responsible? Like beanie babies, aren’t meme coins just harmless fun?

The answer to the first – who will regulate meme coins – appears to be wide open. one logical party, at least when it comes to actual cryptocurrencies, would be the CFTC, but if they followed the language and logic of the SEC, they would decline the invitation and waive off this thing that is neither fish nor fowl. Other options might be FinCen or some other part of the Treasury, or even the CFPB? Or could they even fall to some self-regulatory organization, should such a thing ever come to exist in a form strong enough to provide some kind of enforcement muscle.

The second and third question, kind of run together, but are nonetheless distinct. It is certainly true that if meme coins are collectibles that are as harmless as beanie babies (which I’m assuming are actually harmless to everyone except the loved ones of obsessed collectors), then they don’t need to be regulated. But the idea that they could be construed as harmless does not hold up to facts, so the questions of should they be regulated and if so by whom remain real ones.

Let’s look at the most prominent recent example of a meme coin – the Trump and Melania coins – to better understand if anyone has been harmed. Current market value of the Trump coin is approximately $2.4B (CoinGecko – down from a peak of $14.5B with 200M coins circulating), with the Melania coin valued at $106M (CoinGecko – down from a peak of $4.1B with 150M coins circulating). Not surprisingly, the coins are at their lowest value since their original issuance in January. From their peak, the Trump coin has lost 87% of its value while the Melania coin has lost nearly 95% of its value, though it had a quick peak, rapid descent, and has been relatively flat since late January – ‘stable’ in a bad way.

These are substantial losses. Even if some of the ‘collectors’ were speculators playing with house money, the total aggregate loss in value of over $16B is enormous and some of it is certainly real. Early evaluations estimated that over 800,000 accounts lost money. Further, initial statements indicated that there were approximately $100M in transaction costs on early issuance and trading. That is real money.

Proponents of meme coins, a subset of cryptocurrency boosters, have argued that meme coins introduce people to cryptocurrency and its possibilities, but is losing enormous amounts of money with no public accountability the introduction the industry is seeking? And how exactly does something with no business model, no economic purpose, and little interest in stimulating innovation create adherents to a new form of economic engagement? What might the regulatory framework look like for something that looks like a financial instrument but acts like a beanie baby?