Meme coins are not securities and financial instruments

Cryptocurrencies have taken the financial world by storm, reshaping how we think about money, investments, and even technology.

While Bitcoin remains the dominant force in the market, the rise of altcoins and meme coins has introduced an exciting, often unpredictable dimension to the cryptocurrency landscape.

Altcoins, which encompass any digital currency other than Bitcoin, provide alternatives with unique features, use cases, and potential for growth. Meanwhile, meme coins, born from internet culture and fueled by community-driven enthusiasm, have captivated both seasoned investors and casual enthusiasts alike.

Meme coins are considered a type of cryptocurrency. They are digital currencies that exist on blockchain networks, much like Bitcoin or Ethereum, and can be traded, bought, or sold. However, what sets meme coins apart from other cryptocurrencies is that they are typically created as jokes or for fun, often drawing inspiration from internet memes, trends, or pop culture.

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While cryptocurrencies like Bitcoin and Ethereum were created with specific use cases or technological advancements in mind (e.g., decentralized finance, smart contracts), meme coins usually lack a clear, serious utility. They often rely on community-driven support, viral marketing, and social media hype to gain popularity. Famous examples include Dogecoin and Shiba Inu, both of which started as memes but gained significant attention and investment.

Despite their playful origins, meme coins still operate on blockchain technology and are part of the broader cryptocurrency ecosystem. However, they are often considered higher-risk investments due to their volatility and speculative nature.

The top meme coins by market capitalization are:

• DOGECOIN – $30.6 Billion Market Cap
• Shiba Inu – $8.07 Billion Market Cap
• Pepe – $3.25 Billion Market Cap
• Bonk – $1.05 Billion Market Cap
• Floki – $775.74 Million Market Cap
• Dogwifhat – $531.35 Million Market Cap

Forbes: Top Meme Coins Today By Market Cap

On February 27, 2025, the United States Securities and Exchange Commission (US SEC) declared that meme coins are not securities and are not financial instruments.

In its guidance, the US SEC advised that most meme coins are not securities and do not fall under the SEC’s scope of regulations.

It defined a “meme coin” as a type of crypto asset inspired by internet memes, characters, current events, or trends, for which the promoter seeks to attract an enthusiastic online community to purchase the meme coin and engage in its trading.

In this context, a “Crypto Asset” is an asset that is issued and/or transferred using distributed ledger or blockchain technology, including, but not limited to, so-called “virtual currencies,” “coins,” and “tokens,” and that relies on cryptographic protocols.

The US SEC declared that, in its view, transactions in meme coins do not involve the offer and sale of securities under US federal securities laws. This means that persons who participate in the offer and sale of meme coins do not need to register their transactions with the SEC. Furthermore, such transactions fall within any of the exemptions from registration.

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It also clarified that meme coin purchasers and holders are not protected by US federal securities laws.

The US Securities Exchange Act defines a “security” by providing a list of various financial instruments such as stock, note, and bond. The US SEC found that a meme coin does not constitute any of the common financial instruments that fall under the enumeration or definition of “security” because it does not generate a yield or convey rights to future income, profits, or assets of a business.

Using the “investment contract” test in SEC v. W.J. Howey Co., which analyzes whether certain arrangements or instruments are investment contracts based on their “economic realities,” the agency declared that the offer and sale of meme coins are not considered investment contracts.

The evaluation based on the economic realities of a transaction is premised on a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.

Based on the foregoing, the agency explained that the offer and sale of meme coins do not involve an investment in an enterprise — their funds are not pooled together to be deployed by promoters or third parties for developing the coin or related enterprise, nor is it undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others — as the value of meme coins is derived from speculative trading and collective sentiment or the market.

The SEC declared that the trading and collective sentimnt of the market on meme coins is akin to that of a “collectible.”

Accordingly, with the pronouncement of the US SEC, at least in America, meme coins, while recognized as Crypto Assets operating by way of blockchain technology and which may be virtual currencies, tokens, and coins, are considered collectibles or merchandise in the same way as paintings, sports cards, stamps, antiques, or rare books.

In the Philippines, meme coins are also considered Crypto Assets but are, so far, seen as financial products.

The Financial Products and Services Consumer Protection Act, passed in 2022 (RA 11765), defines Financial Products as products or services that are developed or marketed by a financial service provider, which may include, but are not limited to, savings, deposits, credit, insurance, pre-need and health maintenance organization (HMO) products, securities, investments, payments, remittances, and other similar products and services. This also includes digital financial products or services, which pertain to the broad range of financial services accessed and delivered through digital channels.

The Philippine SEC has published its SEC Rules on Crypto-Assets Service Providers for public comment, where it defines Crypto-Assets as cryptographically secured digital representations of value or rights that rely on a cryptographically secured distributed ledger or similar technology to validate and secure transactions, which can be transferred, stored, or traded electronically.

Further, the SEC declares that Crypto-Assets are to be classified as financial products as defined under Section 3(c) of the Financial Consumer Product Protection Act (R.A. No. 11765).

What this means is that no Crypto-Asset shall be sold or offered for sale or distribution within the Philippines without complying with the rules of the SEC, which include submission of a Registration Statement to and approval by the SEC. Moreover, any person or entity offering Crypto-Assets to the public must comply with the Philippine Anti-Money Laundering Law, rules, and regulations.

On the other hand, Crypto-Asset Service Providers — which are entities that, as a business, offer or engage in the provision of one or more crypto-asset services, including by making available a digital platform that provides those services — must first register as such with the SEC.

With varying approaches to crypto regulation across the globe, from the United States’ stance on meme coins to the Philippines’ view of them as financial products, it is clear that the future of cryptocurrencies — including meme coins — remains uncertain and dynamic. Investors should remain cautious, understanding the risks involved, and stay informed about regulatory changes that could impact the market. As the crypto landscape continues to grow, it will be fascinating to see how altcoins and meme coins evolve in the coming years and whether they will solidify their place in the broader financial ecosystem

(The author, Atty. John Philip C. Siao, is a practicing lawyer and founding Partner of Tiongco Siao Bello & Associates Law Offices, an Arbitrator of the Construction Industry Arbitration Commission of the Philippines, and teaches law at the De La Salle University Tañada-Diokno School of Law. He may be contacted at [email protected]. The views expressed in this article belong to the author alone.)