SEC’s Latest Developments: Coinbase, Memecoins, and the Future of Crypto Regulation

SEC Dismisses Civil Enforcement Action Against Coinbase

The case dates back to June 2023 (two years after Coinbase’s IPO), when the SEC sued Coinbase, alleging that the exchange had combined the functions of a broker, exchange, and clearinghouse—roles typically kept separate—in violation of U.S. securities laws.

On February 28, 2025, the SEC announced the dismissal of its civil enforcement action against Coinbase, signaling a softening stance by U.S. regulators toward the cryptocurrency sector. According to the SEC’s statement, the decision was not based on a substantive evaluation of the claims but rather on the assessment that existing legal frameworks and the rapid development of the cryptocurrency industry necessitate more flexible and updated regulatory strategies.

The background of this dismissal is worth exploring:

• Historical Burden: Since 2023, the SEC has initiated multiple lawsuits against Coinbase, accusing it of offering unregistered securities trading services, yet it has consistently failed to clearly define what constitutes a “security.”
• Policy Shift: In January 2025, the SEC established a “Cryptocurrency Working Group,” led by Commissioner Hester Peirce, a long-time advocate for industry innovation. The group’s core mission is to develop a clear regulatory framework rather than exert pressure through litigation.
• Financial Impact: Following the announcement of the dismissal, Coinbase’s stock price rose by 12%, and the number of banking partners for its fiat on-ramp and off-ramp services increased by 30% within a week, reflecting the market’s positive response to regulatory certainty.
• Market Impact: According to Chainalysis data, U.S. cryptocurrency trading volume accounted for approximately 30% of the global market share in 2024 (Source: Chainalysis 2024). This data underscores the significant influence and importance of the U.S. cryptocurrency market, which the SEC must consider when formulating policies.

Deep Legal Gaps: Is Traditional Securities Law Suitable for the Emerging Cryptocurrency Industry?

In the cryptocurrency market, especially for mainstream exchanges like Coinbase, compliance issues and legal challenges have long been a focal point for the industry. As one of the largest cryptocurrency exchanges in the U.S., Coinbase has consistently sought to collaborate with the SEC to comply with U.S. securities laws. However, the SEC’s previous lawsuit against Coinbase reflects a deeper legal gap: is traditional securities law suitable for the emerging cryptocurrency industry?

Coinbase’s defense primarily focused on two points: first, they argued that the platform itself is not a securities exchange; second, they contended that even if certain tokens traded on the platform were involved, these tokens do not meet the legal definition of “securities.” According to Section 3(a)(10) of the U.S. Securities Act, a security must satisfy the characteristic of investors expecting to profit from it. This legal framework clearly cannot be fully applied to the cryptocurrency sector, where many digital assets are not issued for investment purposes but rather as technological products or social tools.

Market Implications and Potential Impact

The SEC’s dismissal of the enforcement action against Coinbase undoubtedly sends a positive signal to the cryptocurrency industry: compliance issues for cryptocurrency exchanges, particularly regarding the “security” debate, may be resolved in a more adaptable manner. This move instills confidence in other platforms within the industry, especially against the backdrop of high policy uncertainty in the U.S. cryptocurrency sector.

In 2025, the market’s demand for regulatory clarity and stability has become increasingly urgent. The SEC’s shift may provide a clearer framework for future compliance reviews and operations.

SEC’s Guidance on Meme Coins and Its Market Impact

In February 2025, the SEC’s Division of Corporation Finance issued guidance on Meme coins, explicitly stating that Meme coins do not meet the definition of securities under the Securities Act and are therefore not protected by federal securities laws. According to the SEC, Meme coins primarily exist as social or entertainment products, with their value derived not from the investment purpose of “expecting to profit” in traditional securities markets but rather as collectibles, thus falling outside the regulatory framework for securities.

The market characteristics of Meme coins differ significantly from traditional cryptocurrencies. Their issuance and circulation do not rely on traditional investment return expectations but rather on community enthusiasm and market sentiment. For example, Dogecoin was not initially created for investment purposes but as a joke on social media. Nonetheless, Dogecoin and other Meme coins have reached market capitalizations in the tens of billions of dollars.

According to CoinMarketCap data, as of December 2024, Dogecoin’s market capitalization was approximately 40billion,whileSHIB′smarketcapexceeded40billion,whileSHIB′smarketcapexceeded50 billion. These figures reflect the massive bubble and high speculation in the Meme coin market, complicating the SEC’s regulatory approach. The SEC believes that Meme coins, as social and cultural products, exhibit market behaviors more akin to entertainment consumption than traditional investment activities in securities markets.

The SEC’s explicit statement that Meme coins do not qualify as securities will have profound implications for the Meme coin market. First, issuers and traders of Meme coins will no longer need to comply with the registration and exemption provisions of the Securities Act. This means that buyers and holders of Meme coins will no longer be protected by federal securities laws, significantly reducing legal safeguards for investors.

Second, the SEC’s statement provides clues about the future regulatory direction for Meme coins. If Meme coins are widely recognized as “non-security” products, they may face looser regulations and may not require extensive compliance checks like traditional cryptocurrencies. This policy shift will undoubtedly spur more innovation and experimentation, particularly in digital art, NFTs, and decentralized finance (DeFi).

However, the SEC also warned that if Meme coin activities involve fraud, market manipulation, or other illegal behaviors, regulators retain the authority to impose penalties. Therefore, participants in the Meme coin space, especially issuers and large-scale investors, must still take responsibility for their actions.

Market data validates the long-term impact of this announcement:

• In January 2025, Meme coins accounted for 11% of cryptocurrency market trading volume but only 2.3% of market capitalization, highlighting their high volatility and low value anchoring.
• Following the SEC’s statement, mainstream Meme coins like DOGE and PEPE rose by an average of 18% within 24 hours but later retraced to a 5% range, reflecting market caution about the sustainability of “policy dividends.”

The SEC’s guidance on Meme coins provides a clearer regulatory framework for the cryptocurrency market, but it also reveals a significant potential risk—market speculation. Over the past few years, the rise of Meme coins has been not just a cultural phenomenon but also a financial one, creating substantial wealth in a short time while also introducing significant speculation and bubble risks.

The SEC’s decision may lead to more Meme coins being classified as non-security products, offering greater legal certainty for businesses and investors looking to enter the crypto market. At the same time, investors should remain vigilant, understanding the speculative nature of these assets rather than treating them as traditional securities.

Regulatory Vacuum and Market Contradictions in Meme Coins

The SEC’s classification of Meme coins as “non-securities” is essentially a compromise on their cultural attributes, but this has sparked deeper market contradictions.
The legal exemption for Meme coins does not eliminate their inherent risks:

• Data Reveals Vulnerability: In 2024, over 60% of Meme coin projects went to zero within two weeks of issuance, with retail investors suffering an average loss rate of 75%.
• Cost of Regulatory Vacuum: Without federal securities law protection, investors cannot seek compensation through class-action lawsuits, relying instead on state-level consumer protection laws, which have a success rate of less than 10%.

A Typical Case is the collapse of Argentina’s LIBRA coin: after being endorsed by President Javier Milei, LIBRA’s market cap briefly exceeded $500 million, but insider selling caused its price to plummet by 80% within 24 hours, leaving tens of thousands of investors with nothing. The SEC’s inability to intervene in such events exposes potential loopholes in the “non-security” policy.

SEC Commission States: Future Regulatory Direction Will Focus on Policy

The SEC has stated that future efforts will center on policy-making, aiming to establish a clearer and more detailed regulatory framework for digital assets. This announcement reflects the SEC’s attention to the cryptocurrency market and its response to the need for future digital asset regulation. As the market rapidly expands and technology evolves, the SEC’s regulatory approach must adapt to new market structures and complexities.

Future SEC regulation will emphasize clarity over arbitrary enforcement, focusing on building a policy framework. The SEC noted that policy development must consider both the innovative needs of the cryptocurrency market and the protection of investors’ legal rights. Additionally, the SEC emphasized a more comprehensive regulatory approach, covering all aspects of the crypto market, including exchanges, issuance platforms, token offerings, and cross-chain transactions. This indicates that future cryptocurrency regulatory policies will not be limited to single areas but will form a more integrated policy system.

Transparency and Compliance Requirements

The SEC further stated that the future cryptocurrency market will require higher transparency and compliance from exchanges and projects. This may mean stricter scrutiny of cryptocurrency exchanges, particularly in areas such as fund flows, disclosure of trading pairs, and the implementation of anti-money laundering (AML) and counter-terrorism financing (CFT) measures. For investors, increased transparency will provide more market signals, reducing uncertainty and unfair trading practices.

This policy direction also implies that any project involving significant capital flows in the cryptocurrency space must clearly report its fund movements, trading activities, and risk control measures to regulators. While this will increase compliance costs for projects, it will also enhance market maturity and sustainability.

DeFi and Regulatory Challenges

Regulating DeFi projects has been a challenge for global regulators. In its statement, the SEC mentioned that it will focus on regulating DeFi projects in the future but has not yet clarified whether they will be included in its traditional securities regulatory framework.

DeFi projects typically do not rely on traditional financial institutions or centralized platforms but instead use smart contracts and blockchain technology to facilitate transactions and financial services. This model makes transactions more anonymous and harder to track, increasing regulatory complexity. The SEC’s challenge lies in ensuring market safety and investor rights without stifling innovation and decentralization.

Currently, U.S. and other global regulators are actively exploring regulations applicable to DeFi. For example, the European Union has begun implementing the Markets in Crypto-Assets (MiCA) regulation, which aims to provide a clearer legal framework for the crypto asset market, including DeFi. In the U.S., the SEC must collaborate with other regulators to balance regulation and innovation.

Potential for International Regulatory Cooperation

As cryptocurrencies are a global asset class, their regulation cannot be addressed by a single country or region alone. Therefore, international regulatory cooperation has become increasingly important. The SEC has stated that it will strengthen collaboration with regulators from other countries, particularly in areas such as AML, CFT, and cross-border payments.

Enhanced global regulatory cooperation is expected to provide more unified regulatory standards for the cryptocurrency market, reducing compliance risks arising from legal differences across regions. For example, discrepancies between European and U.S. regulatory frameworks can complicate cross-border transactions and capital flows. Through international cooperation, regulators can effectively prevent regulatory arbitrage in the cryptocurrency market.

Conclusion: The Far-Reaching Impact of SEC Regulatory Policies on the Cryptocurrency Industry

In February 2025, the SEC announced the dismissal of its civil enforcement action against Coinbase and issued guidance on Meme coins, marking a significant shift in U.S. cryptocurrency regulatory policy. These two decisions reflect the SEC’s growing recognition of the cryptocurrency market’s maturity and signal that regulatory approaches to this emerging industry will become more flexible and adaptive.

The SEC’s dismissal of the enforcement action against Coinbase sends an important message to exchanges and investors: compliance issues in the cryptocurrency industry require more nuanced and forward-looking regulatory measures. Meanwhile, the guidance on Meme coins provides a clearer legal framework for investors in this space, reducing regulatory uncertainty.

In the future, as policies continue to evolve and enforcement intensifies, cryptocurrency regulation will gradually move toward standardization and transparency, with industry participants placing greater emphasis on compliance and legal risk control. As a core U.S. regulatory body, the SEC’s decisions not only impact the U.S. market but also have significant global implications. As the market continues to develop and innovate, dialogue and interaction between regulators and the industry will become increasingly important, driving the cryptocurrency sector toward a healthier and more sustainable future.

With the evolution of policies and the refinement of regulatory frameworks, the future of the cryptocurrency market is filled with both uncertainty and opportunity. The SEC’s latest developments undoubtedly provide important legal references for the industry, offering investors and market participants a clearer outlook.