Regulation of Memecoin should not be our current priority

Recently, we witnessed a surge in crypto prices, signaling the return of the speculation frenzy. However, this time it’s not just any ordinary trend. Memecoins, the humorous crypto tokens that ride on internet jokes, have made a remarkable comeback and are causing quite a stir in the crypto world.
One of the most well-known memecoins is Dogecoin, which started as a joke but has now gained popularity beyond memes. The appeal of memecoins goes beyond providing quick laughs or making fast profits. It has become a cultural phenomenon. However, what perplexes us is why regulatory bodies turn a blind eye to these joke coins while legitimate, innovative crypto projects face burdensome regulations.
Imagine a scenario where only meme stocks like GameStop are celebrated, while tech giants like Apple and Microsoft, which actually contribute to technological advancements, are ignored. This situation seems absurd, yet it reflects the current state of crypto regulation. Memecoins are given the green light, while transformative projects are left in the dust.
Chris Dixon of Andreessen Horowitz aptly compared the crypto market to two camps: the “casinos” that focus on flipping tokens for quick profits, and the “computers” who see blockchain as a revolutionary platform for future innovations. It is frustrating that the casinos receive all the attention, leaving the computers in the background. This skewed focus is unfair and hinders progress in technological advancements such as decentralized AI and combating deepfakes.
Unfortunately, U.S. regulations are not helping the situation. The Securities and Exchange Commission (SEC), although responsible for ensuring safe investments and smooth markets, relies on outdated criteria like the “Howey test” from 1946 to determine securities. This approach is inadequate for the crypto industry. Bitcoin and Ethereum managed to navigate these regulatory challenges by evolving into community-led projects that operate independently, resembling public utilities rather than private enterprises.
In contrast, other projects with similar potential for innovation are left grappling with regulatory uncertainties. This is where smarter regulations come into play. We need disclosures that make sense, lock-up periods to prevent opportunistic behavior, and a historical perspective to avoid repeating past mistakes. Just as regulations were put in place after the Great Depression and led to an era of innovation and economic growth, it is high time for a regulatory framework that recognizes legitimate crypto projects while curbing meme-driven madness.
The security of meme tokens remains a significant concern. A recent investigation into Base, Coinbase’s Ethereum layer 2 solution, revealed that the majority of memecoins on the platform are highly vulnerable. Around 90% of these tokens failed basic security checks, lacking essential features like locked liquidity and verified contracts that prevent scams like rug pulls.
Some of these tokens are outright traps, with 17% designed to deceive unsuspecting traders through tactics like honeypots, which entice investors with high returns but prevent them from selling their stakes.
Given these issues, why are we still fixated on regulating memecoins when there are more pressing matters to address? It is time to shift our focus and allocate resources to innovation and securing real cryptocurrencies, rather than pursuing the mirage of memes. While some may view this perspective as memecoin hatred, I am, in fact, a true believer in the potential of blockchain technology.
To the future of blockchain!
If you’re interested, you can read Chris Nixon’s entire essay here.