With the development of the crypto space, there has been an increase in regulation activities. Countries are now creating laws to govern cryptocurrencies, and since many crypto startups do not have access to the right legal counsel, they may flout these laws, which could be disastrous.
The above is the prime reason behind the concept of a Simple Agreement for Future Tokens (SAFT). It is a security given to investors that states that digital tokens will be transferred from the team to them in the future.
It is a safe way to raise funds without breaking any laws. However, some countries feel that organizing an ICO, IDO, or IEO means offering securities to people, which companies cannot do without express permission from the authorities.
It can also be linked to its counterpart, a simple agreement for future equity (SAFE) that permits startup investors to get equity in the future because they invested their cash in the company.
SAFT is an investment contract designed to allow crypto startups to raise funds without breaking any laws.
The US SEC believes that organizing an Initial Coin Offering (ICO) means that the startup is hosting a security sale, which is not allowed without the authorities’ permission. Before a crypto company can know if they are selling a security or not, they should consider doing the Howey Test. The origin of the Howey Test can be traced to a ruling of the U.S. Supreme Court in 1946 when it oversaw the case of Securities and Exchange Commission v. W. J. Howey Co. It offered a guideline on checking if an activity is a security sale or not.
SAFT is an affordable way for companies to raise funds without having to break any laws by giving investors a coin.
