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What does MiCA mean for meme coins?

MiCA and Memes

This guest article has been written by Patrick Aarikka, Legal Advisor to $SWAN.

Disclaimer:This article is provided for informational purposes only. All information and data presented reflect the latest understanding as of the publication date. The information provided in this article is for general informational purposes only and should not be construed as legal advice or investment advice under any Finnish, EU, or international law. The content presented herein does not constitute professional legal or financial advice, and you should consult with a qualified professional before making any decisions based on this information. The authors and publishers of this article are not responsible for any actions taken based on the information provided herein.

Executive summary:

This article explores the transformative impact of the Markets in Crypto-Assets Regulation (MiCA) on the meme coin ecosystem, analyzing its implications for launches, exchange listings, and regulatory compliance. While MiCA is often praised for harmonizing crypto regulation across the EU and fostering investor protection, its origins are rooted in reactionary responses to corporate threats, which expedited its drafting process — perhaps too much, leading to some significant oversights.

For meme coins, MiCA introduces both opportunities and challenges: creating a framework for legally compliant initial coin offerings (ICOs) while simultaneously raising barriers to entry. Through detailed analysis, the article discusses how MiCA reshapes the lifecycle of meme coins, from their genesis in decentralized finance (DeFi) pools to their pursuit of centralized exchange (CEX) listings. It examines how regulatory burdens and compliance costs could limit the organic growth of meme coins while paradoxically allowing for the survival of trivial or absurd tokens if structured correctly under MiCA. Ultimately, this article reflects on the broader implications of MiCA for innovation, accountability, and the evolving role of meme coins in a regulated crypto landscape.

1. What the fuck is MiCA?

On 31 May 2023, the European Parliament and the Council came together to make history, reaching an agreement on a landmark framework designed to govern the issuance and provision of services related to crypto-assets across the EU. The result? The world's first bespoke regulatory regime for crypto-assets: the Markets in Crypto-Assets Regulation (MiCA, (EU) 2023/1114). More than just a legislative milestone, MiCA represents a bold leap into the future of financial and technological legislation, aimed towards addressing the often murky world of crypto-assets that had long operated outside the boundaries of existing financial laws within the EU.

With its sights set firmly on harmonisation, MiCA aims to unite the fragmented regulatory approaches of EU Member States, putting an end to regulatory arbitrage and fostering a safer, more predictable environment for investment and innovation — or so the official narrative goes, at least. For those with deeper insight into MiCA's origins, it becomes evident that these end-goals, albeit respectable and well thought-out, were far from the actual driving forces behind its creation.

In reality, MiCA's origins are steeped in a far more reactionary narrative: the EU's response to the looming specter of Libra, the stablecoin initiative proposed by Facebook (now Meta).1 The idea of a tech giant wielding a global private payment system, potentially outside the reach of governmental oversight, sent shockwaves throughout the world, leaving regulators shaking in their boots.2,3 Libra was not just a theoretical challenge to monetary sovereignty — it was a tangible threat to the delicate balance of financial systems controlled by central authorities.4 Thus, MiCA seemed to emerge more as a regulatory shield against private companies suggesting alternative payment infrastructures, rather than the incubator for innovation that it often is described as. After all, one can never escape governmental supervision whenever money is involved, right?

MiCA itself regulates various crypto-assets, which at a high level are classified into three types as per Article 1(1), which defines MiCA's subject matter:

  1. Asset-referenced tokens (ARTs);
  2. Electronic money tokens (EMTs); and
  3. Crypto-assets other than ARTs or EMTs (Other Tokens).

Although the regulatory portion of MiCA does not explicitly define stablecoins, examination of Recital 41 of MiCA and Recital 14 of Council Directive (EU) 2023/2226 on administrative cooperation in the field of taxation reveals that the EU seems to consider both ARTs and EMTs as stablecoins. As meme coins are obviously a lot more interesting than stablecoins and also the entire point of this article, as can be seen from its title, this means that meme coin connoisseurs can completely disregard Titles III and IV of MiCA — those shall remain the concern of entities issuing or distributing stablecoins in the EU.

Title II of MiCA, governing these so-called Other Tokens, is the one that hodlers and traders of meme coins should pay special attention to, due to it being the portion of MiCA that contains the rules related to market-entry within the EU for practically all other crypto-assets than stablecoins and non-fungible tokens (NFTs), which the EU — in its everlasting wisdom — left completely unregulated by MiCA, as per Article 2(3). Additionally, Title V of MiCA contains the rulesets that crypto-asset service providers (CASPs) have to follow. A CASP refers to those entities that provide crypto-asset services, such as exchanging them for funds or other crypto-assets, within the EU. Therefore, Title V applies directly to your favourite centralized exchange (CEX) whenever it provides any services to residents of the EU; unless you only trade in NFTs, which would beg two questions: (i) why the fuck are you reading this article; and (ii) how is life in 2021?

2. MiCA and Meme Coin Launches – a Threat or a Possibility?

Traditional meme coin launches, often conducted through initial coin offerings (ICOs) or similar methods of early distribution, have seen a decline in popularity in recent times as platforms like pump.fun have streamlined speculative trading of meme coins without the need for formal launches.5 Due to the volatile nature of the meme coin market, tokens launched on platforms like pump.fun can reach significant market capitalizations extremely fast, with large CEX-listings adding to the snowball effect that comes along with this kind of rapid growth — exactly what happened to $CHILLGUY, for example.6,7

After the golden age of ICOs, practically between the years of 2015 and 2017, they pretty much fizzled out as a method of crowdsourcing funds, which was influenced by regulatory crackdowns and legal uncertainty.8 While European authorities and regulators noted that ICOs came with significant risks and lacked in necessary protective methods for investors, even the European Securities and Markets Authority (ESMA), which is somewhat known for its "anti-crypto" stance9, noted that "provided the relevant safeguards are in place, ICOs could provide a useful alternative funding source for blockchain start-ups and other innovative businesses that would find it difficult or costly to raise capital through traditional funding channels."10 Building a community around a meme coin, while simultaneously performing marketing activities and attempting to get that specific meme coin listed into prominent exchanges, requires capital resources. If the company or community behind the meme coin cannot fund these activities, either via an ICO or some other form of crowdfunding, that meme coin faces significant struggles. MiCA may have — perhaps accidentally — changed the game on this front.

Title II of MiCA introduces a groundbreaking framework for regulatory compliant issuance and distribution of crypto-assets other than stablecoins, creating a viable and legally sound pathway for meme coins to enter the market, while simultaneously allowing their creator to raise funds by "selling" (i.e. offering) the meme coins to the public in order to fund relevant activities, such as listing expenses of CEXs, without the looming fear of a regulator having a bad day, potentially resulting in it deeming these kinds of activities as an illegal securities offering or other unauthorized provision of financial services. Many other scholars seem to agree with this view, stating that it may even be a "time for a renaissance of initial coin offerings"11 — we soundly agree with this view, hence why we are testing the regulatory waters with the $SWAN ICO. While we are extremely confident with this $SWAN's ability to counter the turbulent flows of the regulatory waters with its MiCA-compliant wings, the effects of MiCA on meme coins are not limited solely to ICOs or launches; MiCA affects the exchange listing processes of meme coins as well.

3. Getting Listed in 2025

Well, how exactly does MiCA affect the listing of meme coins in the future then? Let's assume that a new meme coin has entered the pools of decentralized finance (DeFi), but has not yet found its way into any centralized exchanges. This typically indicates that the highest surges in its market capitalization — and, by extension, its value — remain untapped, as such surges typically coincide with those coveted initial CEX listings. Before going further with our hypothetical meme coin, back to MiCA for a second: Article 5 states that "seeking admission to trading" in the EU of a crypto-asset that falls within the scope of Title II is prohibited unless the one who is seeking such admission fullfils all mandatory requirements outlined within that Article 5. As MiCA is a weird Regulation, drafted in haste under the fear of Mr. Zuckerberg's infernal payment system threatening to emerge from the depths of Facebook and its marketplace, the act of "seeking admission to trading" has not been defined at all within MiCA's Article 3 — which is quite literally titled "Definitions" — but rather, much more logically, this definition can be found from Article 1, titled "Subject matter", wherein it is stated that an "admission to trading" refers to the “admission of crypto-assets to trading on a trading platform for crypto-assets”. Perfectly logical and reasonable, and should not cause any confusion to anyone, correct?

Fortunately, MiCA's approach to defining the operation of a trading platform for crypto-assets is notably clearer than its convoluted handling of "admission to trading". Article 3(1)(18) provides a precise definition, describing it as the management of systems that bring together multiple third-party buying and selling interests in crypto-assets. Simplified, this refers to the trading venues we typically associate with CEXs, where transactions result in contracts for either crypto-to-fiat or crypto-to-crypto exchanges.

Now, back to our hypothetical meme coin that is making the rounds on DeFi, but has not yet found its way into being tradable at any larger centralized exchanges. In order to fill the applicable requirements from Article 5 so that someone could attempt to seek admission to trading of this new meme coin, they would have to focus most of their efforts into: (i) drafting a white paper that complies with the requirements of Article 6 and the secontary legislation supporting it12; (ii) notifying this white paper, and its accompanying legal opinion of the meme coin that conforms to specific requirements, to their competent authority in accordance with Article 8; and (iii) making sure that all of their marketing communications related to this meme coin comply with MiCA's requirements and contain all necessary disclosures, whenever those must be presented. From experience, we can state that, while obviously doable, this kind of regulatory compliance does not come without significant and intentional efforts. Therefore, unless this hypothetical meme coin has either an extremely solid and coherent community or an issuer with extensive resources and know-how, it is rather likely that it will just remain as a fish swimming within the DeFi pools, without ever becoming the whale of CEXes that it might have organically transformed into prior to MiCA stepping into the shoes of a CEX-gatekeeper. All hope might not be lost for our DeFi meme coin quite yet, however.

Article 5 of MiCA does have a slight exception to this “draft a white paper before even thinking about seeking admission to trading bro” -rule that is typically enforced; Article 5(2) states that if a previously non-MiCA-compliant Other Token is sought to be admitted to trading on the initiative of the operator of a trading platform itself, then the burden of compliance falls upon that operator (i.e. the CEX). This means that if our hypothetical DeFi meme coin somehow were to become a massive hit, making a CEX interested in listing it itself without external influence, they would have to draft and notify the white paper and comply with all the other requirements, instead of the issuer or community of the meme coin being the responsible party. However, it is reasonable to assume that a CEX will not dedicate all this effort and cost into creating compliance documentation for a random DeFi meme coin, unless there is some rather extraordinary traction surrounding that specific meme coin — they are in the business of making money, above all.

Based on the above, it does really seem that MiCA may pump the brakes on the 2024 phenomenon of random meme coins skyrocketing from obscurity to staggering valuations. These kinds of meme coins, often born from a single viral tweet or fleeting hype, have relied heavily on the catalytic effect of CEX listings to transform negligible market caps into multimillion-dollar sensations. By imposing stringent requirements for admission to trading and tightening the regulatory framework, MiCA could significantly curtail the explosive trajectories of such meme coins, effectively putting an end to the era of meme coins achieving astronomical valuations seemingly out of nowhere. Thankfully for those meme coins that had already taken advantage of the aforementioned trajectory, they can continue on their current path without any hurdles from MiCA. Article 5(4)(a) confirms that if an Other Token (e.g. a meme coin) has been admitted to trading within the EU before 30.12.2024, it will stay exempt from the obligation to publish a white paper and most other obligations that MiCA imposes. One of these exemptions for existing meme coins is rather odd, however; these so-called “grandfathered” crypto-assets do not have to follow the same rules for regulated marketing communications as their younger counterparts must comply with — somewhat questionable from the viewpoint of investor protection, which should be the cornerstone of MiCA, or is that just some fud that I brewed in my mind after staring at Times New Roman for too long on EUR-Lex?

And because the crypto sphere seems to usually be rather hesitant in believing these sorts of somewhat unfortunate and even doubt-inspiring interpretations related legislation, let us provide just a little more reasoning before jumping to the next topic. Article 76 of MiCA sets forth the general legal framework that a CASP that aims to operate a trading platform must base their operating rules upon. While some of these general rules are rather broad, the following one from Article 76(1)(2) is extremely clear: these operating rules shall clearly state that a crypto-asset is not to be admitted to trading where no corresponding crypto-asset white paper has been published in the cases required by MiCA. Relatively straightforward; yet still sometimes even something as simple as this seems to be completely disregarded, which is exactly what happened when MiCA came into effect for stablecoins on 30 June 2024. In an earlier article similar to this one,13 written while rallying under the banner of prudentially supervised stablecoins, we presented quite simple MiCA-facts; inter alia, the prohibition of granting interest for holders of stablecoins and the prohibition of listing stablecoins that are not issued by electronic money institutions or credit institutions, but despite their simple nature, these facts were labelled as uncertain and even being up to interpretation. Well, they obviously were not, with Circle being finally forced to stop paying interest for USDC in Europe14 and most larger exchanges delisting Tether's USDT due to non-compliance.15

4. MiCA & Memes – a Double-Edged Sword

Regulation is often optimistically described as the stabilizing force in volatile markets, which is typically implemented as those much-needed guardrails to protect participants and ensure long-term viability. The markets of crypto-assets are definitely volatile ones, and the aim of MiCA is no exception to the above, aiming to provide an unprecedented level of trust to the crypto-asset ecosystem. By mandating transparency, accountability, and compliance, MiCA seeks to eliminate the bad actors and questionable practices that have plagued the industry for years. For investors, this trust translates into confidence: projects operating under MiCA should inherently be more credible and the chances of outright scams or rug pulls thus minimized. While this may be true, is it the entire truthful reflection of what MiCA actually accomplishes?

It has been a well-established fact for decades at this point that with increased regulation, the barrier of entry into the affected market increases significantly; meanwhile reducing paperwork could dramatically improve efficiencies within such markets.16 As oftentimes happens with any regulatory initiative, MiCA comes in swinging a double-edged sword. While it fosters trust, it simultaneously raises the barriers to entry for new and smaller projects. For a meme coin — a category not typically associated with compliance or meticulous planning — the procedural demands of MiCA can be daunting. Drafting a compliant white paper, securing legal expertise, and meeting disclosure obligations requires vast resources and knowledge that many meme coins simply cannot access. The days of casually launching a token over a weekend and seeing it soar to multimillion-dollar market caps on the back of pure hype will soon likely effectively be over in the EU. If other jurisdictions follow similar regulatory paths, which is what the EU is actively suggesting they should do,17 that may become the global standard.

Reconciling the very foundational wild and inherently non-compliant nature of meme coins with the formalities of a regulatory frameworks like MiCA creates a tension that many projects will struggle to navigate. Simultaneously, one has to ask the question of, why? Why are this extensive compliance obligations imposed onto something seemingly so trivial in the first place? The need for binding investor protection can easily be identified for most utility-driven crypto-assets, because for those kinds of projects, someone could actually make an actually justifiable investment-decision based on fraudulent claims and end up losing their investment in an unforeseeable manner. However, justifying those aforementioned increased regulatory burdens becomes a whole lot shakier when those same funds are invested into literal meme coins with no function other than existing on the blockchain. Is there reeeally a need for the EU to empower an individual with the ability of raising credible claims against the issuer of, for example, CumRocket,18 when their "Cummies" go down in value? Hopefully the next iteration of MiCA will be drafted a bit less urgently so that these sorts of questions have the time to cross the collective mind of the European bureaucracy. Meanwhile, before that happens, we get to enjoy a rather weird point in time where actually innovative financial tools — such as stablecoins programmed to grant automatic yield based on the interest rates set by the European Central Bank — are strictly and uncompromisingly banned, but at the same time it would be completely feasible to set up a “rugpullcoin” with the purpose of losing every investor's money completely, which would be completely fine if set up correctly under the regulatory umbrella of MiCA. What a weird time we live in within the world of crypto-asset regulation. Anyways, as a seasoned memelord myself, I welcome this shitshow with open arms and will truly embrace it.

Footnotes and references

  1. https://philippsandner.medium.com/libra-2-0-a-compliant-global-platform-for-the-digital-programmable-eur-usd-gbp-co-67e1b8a2c0cb
  2. See, for example, the G7's Working Group on Stablecoins, which was established as a direct reaction to Libra: https://www.bis.org/cpmi/publ/d187.pdf
  3. See, for example, studies provisioned by the European Parliament: https://www.europarl.europa.eu/RegData/etudes/STUD/2020/648779/IPOL_STU(2020)648779_EN.pdf
  4. See, for example, the European Central Bank's opinions on Libra: https://www.ecb.europa.eu/press/financial-stability-publications/macroprudential-bulletin/html/ecb.mpbu202005_1~3e9ac10eb1.en.html
  5. https://decrypt.co/resources/what-is-pump-fun-the-solana-meme-coin-factory
  6. https://en.cryptonomist.ch/2024/11/21/chillguy-the-meme-coin-on-solana-that-takes-off-with-a-2000-jump/
  7. https://cryptobriefing.com/chillguy-binance-listing-market-cap/
  8. https://www.forbes.com/councils/forbesfinancecouncil/2018/11/27/the-ongoing-evolution-of-the-ico/
  9. See, for example, the ESMA's recent view of crypto-assets: https://www.esma.europa.eu/sites/default/files/2024-12/ESMA35-1872330276-1971_Warning_on_crypto-assets.pdf
  10. Page 6: https://www.europarl.europa.eu/RegData/etudes/BRIE/2021/696167/EPRS_BRI(2021)696167_EN.pdf
  11. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4810910
  12. https://www.esma.europa.eu/sites/default/files/2024-07/ESMA75-453128700-1229_Final_Report_MiCA_CP2.pdf
  13. https://www.membrane.fi/blog/mica-casp-emt
  14. https://www.dlnews.com/articles/regulation/coinbase-blames-end-of-usdc-rewards-in-europe-on-mica/
  15. https://nairametrics.com/2024/12/29/tethers-usdt-faces-possible-delisting-in-europe-ahead-of-mica-implementation/
  16. https://documents1.worldbank.org/curated/en/763951468315327580/pdf/766270JRN0WBRO00Box374385B00PUBLIC0.pdf
  17. https://www.europarl.europa.eu/RegData/etudes/BRIE/2023/753930/EPRS_BRI(2023)753930_EN.pdf
  18. https://coinmarketcap.com/currencies/cumrocket/

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