The U.S. Securities and Exchange Commission issued guidance on Thursday stating that it does not consider most meme coins (encrypted tokens derived from memes) to be securities under U.S. federal law. The SEC said it does not believe that people who purchase or hold meme coins are protected by the federal securities laws and that "persons participating in meme coin offerings and sales are not required to register their transactions with the Commission."

The SEC’s new guidance comes about a month into President Donald Trump’s second term, in which he issued an executive order establishing the Department of Government Efficiency, an independent government advisory body named after the meme coin Dogecoin, headed by Elon Musk.

President Trump also launched a commemorative coin called $TRUMP for his supporters just days before the inauguration. The commemorative coin has lost $12 billion in value since its peak on January 19, The Daily Telegraph reported on Thursday.

U.S. Securities and Exchange Commission (SEC) Chairman Mark Uyeda, who was appointed by Trump in January this year, has previously stated that he will establish clear regulatory lines around cryptocurrencies. On Uyeda’s first day in office, he announced the creation of a cryptocurrency task force.

The U.S. Securities and Exchange Commission, of which Uyeda is a member, believes that meme coins are not securities because they "do not generate income and do not convey rights to future revenues, profits or corporate assets." Instead, the SEC said it considers meme coins to be more like electronic collectibles.

Thursday’s guidance on meme coins is a stark retrenchment from the SEC’s views on meme coins under former Chairman Gary Gensler. Gensler has repeatedly called for cryptographic tokens, including meme coins, to be treated as securities and for crypto service providers to proactively register with the SEC.

Also on Thursday, the U.S. Securities and Exchange Commission announced it would drop its lawsuit against Coinbase, the largest cryptocurrency exchange in the United States.

"Over the past few years, the Commission's views on cryptocurrencies have been expressed primarily through enforcement actions without involving the public," Uyeda said in a statement. "It is time for the Commission to correct its approach and formulate cryptocurrency policy in a more transparent manner."