SAFT - Simple Agreement for Future Tokens - is a written agreement with an accredited investor, which says that he is funding the project now in exchange for cheap tokens in the future.
The SAFT principle is built on the following:
- Funds from the investor come to the developer, who uses them for the implementation and launch of the project.
- Upon the launch of the network, tokens are transferred to investors.
- Tokens are transferred to investors not upon receipt of investments, but upon launch of the platform itself.
The introduction of such a scheme plays an important role for the entire crypto industry, because in the legislation of any country there is no interpretation of such a structure. ICO is an analogue of IPO in the classical investment market, while SAFT is an adaptation of the SAFE principle (a Simple Agreement for Future Equity), which is widely used for financed enterprises at the seeding stage.
Within the framework of existing laws, SAFT is completely legal, however, the concept itself does not assume that in the future regulators may revise the rules for regulating such financial relations. Using SAFT instead of ICO will reduce the risks for institutional investors who do not want to work with the cryptocurrency market because of its inconsistency with the existing legislation and the lack of regulation. In the future, SAFT will significantly expand the geographical coverage of ICO projects due to the absence of any legal obstacles in the legislation. Mass investors can also participate in investments of cryptocurrency projects under the SAFT scheme, but only at later stages.
The legal inviolability of such a concept can only be a temporary phenomenon, which will be suppressed by the introduction of new legislative bases in various countries where the fight against cryptocurrencies and ICO is actively flourishing. Today the concept is considered only in terms of legality in accordance with the US base, so it is unclear how it will be evaluated within other countries. Limiting investment to small investors deprives the industry itself of the features of democracy that are, in fact, the basis of the entire crypto economy. SAFT instead of ICO is the first step towards legal regulation of tokens and cryptocurrencies in the eyes of classical regulators. However, it is too early to say that the ICO has already come to an end. The SAFT concept will have to go a long way in being endorsed by crypto-enthusiasts and accepted by the community.