When a company sells a juice to an investor, it accepts funds from that investor, does not sell, offer or exchange coins or tokens. Instead, the investor receives documents indicating that when a cryptocurrency or other product is created, the investor has access to it. The rate at which cryptocurrencies have increased has far exceeded the speed at which regulators have addressed legal issues. It was not until 2017 that the Securities and Exchange Commission (SEC) gave substantial indications as to when the sale of an initial offer of parts (ICO) or other tokens should be considered the same as the sale of a security. A SAFT differs from a Simple Agreement for Future Equity (SAFE) that allows investors who invest money in a startup to later convert that share into equity. Developers use funds from the sale of SAFT to develop the network and technology needed to create a functional je-token, and then provide these tokens to investors expecting that there will be a market on which these tokens can be sold. A Simple Agreement for Future Tokens (SAFT) is an investment contract offered by cryptocurrency promoters to accredited investors. It is considered a guarantee and must therefore comply with securities rules. While a company that collects money through cryptocurrencies could manage a formal framework for accessing global financial markets, it must comply with international, federal and state rules.
One way to do this is to use Simple Agreement for Future Tokens or SAFT. One of the main regulatory hurdles facing a new crypto venture is the Howey test. The U.S. Supreme Court created it in 1946 in its decision on the Securities and Exchange Commission v. W. J. Howey Co., and it is used to determine whether a transaction is considered a guarantee. Since an SAFT is a non-indebted financial instrument, investors who purchase a SAFT face the possibility of losing their money and not appealing if the company fails. The document only allows investors to participate financially in the business, which means that investors are exposed to the same business risk as if they had purchased a SAFE. Since cryptocurrency proponents are probably not well aware of securities law and may not have access to financial and legal advisors, it may be easy for them to break the rules. The development of SAFT creates a simple and inexpensive framework that new businesses can use to raise funds while remaining in compliance with the law. Raising funds by selling digital currencies requires more than setting up a blockchain.
Investors want to know what they are committed to, that the currency will be viable and that they will be legally protected. A SAFT is a form of investment contract. They were created to help new cryptocurrency companies raise money without breaking financial rules, especially the rules that govern when an investment is considered a guarantee.