Are we witnessing the dawn of PolicyFi?
In an earlier article on why memecoins matter, I argued that memecoins are ushering in a new era of civic engagement by forming speculative markets in which citizens are able to trade coins tied to government policies. I suggested that holder distributions and market caps in those markets would signal popular support for underlying policies to lawmakers, who would then take them into account when crafting public policy, fostering a new form of political dialogue between citizen and state.
I called this dynamic PolicyFi and presented it as a constructive use of memecoins.
With the Trump administration coming into office and the President-Elect and First Lady launching memecoins, it is a good time to ask if we are entering the PolicyFi era and, if so, whether we should welcome it.
I believe the answer to each of these questions is yes. The convergence of a meme administration, a meme citizenry and meme advocacy has created fertile conditions for PolicyFi and, perhaps counter-intuitively, for better policy making.
PolicyFi requires the installation of meme-sensitive government actors, or a “meme admin.” In the original piece, I suggested that the incoming administration fit the bill because it understood and respected the power of memes. When I wrote that, I was thinking mainly of Elon Musk and his affinity for dogecoin but also of Trump’s own adeptness at creating and harnessing memes on the campaign trail and while in office.
Admittedly, the President-Elect’s issuance of his own Solana memecoin (Trump), soon followed by his wife’s (Melania), a few days before he took the oath of office surprised even me. (I suspect the timing was driven by concerns over the Emoluments Clause.)
The Trump memecoins immediately soared, draining liquidity from every crypto ecosystem and almost breaking the Solana blockchain. If you are a crypto-native, you will always remember where you were when the President-Elect and soon-to-be First Lady announced the launch of their memecoins.
The Trump coins sharply divided the crypto industry. But, more importantly for present purposes, they put beyond doubt that Americans had elected a “meme admin” that was prepared to engage with financialized memes, and was therefore more likely to engage with them while in office.
The Trump coins contributed another essential ingredient for PolicyFi: the en masse onboarding of the citizenry to memecoins and, in particular, political coins. The stats around the Trump and Melania memecoins, which were explicitly marketed as a form of political expression, are staggering and telling. Most holders were new retail buyers. Around 50% had never bought a Solana altcoin (i.e. tokens on the Solana blockchain excluding SOL and stablecoins) before. Nearly half of buyers created their wallets on the day that they purchased the tokens, and more than 80% of Trump and Melania holders hold less than $1,000 worth of assets on Solana, further suggesting retail popularity.
Many of these meme recruits seem puzzled about what to do next with their crypto. (I expect they’ll figure it out.)
Alongside this meme admin and meme citizenry is the proliferation of more (and more innovative) policy-focused memecoins. Many of the policy memecoins that I mentioned in the original piece, such as D.O.G.E. (Department of Government Efficiency) and SBR (Strategic Bitcoin Reserve), attracted substantial trading volume as the new admin took office and investors began to speculate on its initial policy steps.
Read more: Ivo Entchev – Why Memecoins Matter
However, these policy tokens are still relatively primitive from the perspective of PolicyFi because they place more emphasis on attention flows or prediction (like a prediction market) than on engagement with government actors.
Another token, MILK, fits the PolicyFi thesis better. The express purpose of the MILK meme token is to change U.S. food policy to allow for the sale of unpasteurized milk. The MILK community advances that tangible policy position through its token holdings (2,000 people hold MILK), the market cap of the token (as high as USD $1M) and the community’s production of MILK memes on social media (constant). In an era of PolicyFi, we would expect to see a Cambrian explosion of tokens in the mold of MILK.
The expression of political will through meme policy markets is necessary but not sufficient for PolicyFi. Governments must also begin conversing with those markets when crafting policy. We may be seeing early indicators of this as well.
President Trump has long viewed public markets and especially the stock market as a barometer of his performance and has tried to satisfy them. More recently, he has adopted a similar stance towards the price of bitcoin (which is itself a brand of financial policy) and is doubtless monitoring the price of his own memecoin, which represents the majority of his net worth on paper. Other members of the political establishment from Elon Musk to Senator Cynthia Lummis (R-WY.) have engaged with memes that bear on government policy.
Policymakers have yet to engage with narrowly prescriptive memecoins, such as MILK. If this were to change, I would expect it to arise in disruptive areas that have spawned more general memes, such as government efficiency (e.g. D.O.G.E.), industrial policy (e.g. e/acc) and health policy (e.g. MAHA).
Assuming we are advancing towards PolicyFi, is that a good thing? There are a few strong reasons to believe that it is.
First, introducing speculative markets into government decision-making improves the quality of the most important input in decision-making: information. Speculative markets can process a large volume of information by motivating people to acquire it, share it via trades and crystallize it into consensus prices that persuade a wider audience. A form of government known as “futarchy” leverages speculative policy markets specifically towards improving information flows within government and overall policymaking.
Second, PolicyFi creates positive externalities, in the form of civic engagement and education, despite being driven by greed. Indeed, anyone hoping to make money in PolicyFi will need to become an expert on how the government works, how policy is made, and which emerging policies are undervalued and why. It is difficult to imagine a stronger incentive for ordinary Americans (who are already prodigious sports gamblers) to engage constructively with politics. The PolicyFi degen is, paradoxically, a model citizen.
Third and finally, PolicyFi is engaging an expanding class of citizens who are internet-native and accustomed to expressing himself through speculative markets. That was the citizen drove the GameStop frenzy, which was about income inequality and sticking it to Wall Street, just as it’s currently driving the price of memecoins like SPX and Fartcoin, which lampoon traditional finance. In short, public financial markets have become the medium of ridicule, satire and political expression for a new generation that would much rather buy a memecoin or send a stock to the moon than write their congressman.
A common objection to PolicyFi markets is that they are susceptible to manipulation by our enemies. This is a concern but perhaps not as big as assumed. The same argument was applied to Polymarket, the permissionless prediction market that consistently favored a decisive Trump win in the election. Despite the strong incentive for foreign interference, Polymarket was not only the best barometer of voting sentiment leading up to the election but also the best predictor of election results, affirming the information processing-power of speculative markets.
My aim here is not to advocate for PolicyFi, or to be an apologist for memecoins in general. However, I believe memecoins represent a powerful viral capital formation technology that matters and will impact a range of domains, including politics. I will be watching closely, and so should you.
