A SAFT is based on the “Simple Agreement for Future Equity” (SAFE) model, which has already gained significant traction in the startup scene in Liechtenstein.
Instead of acquiring equity in the company, the investor receives tokens (crypto assets) under a SAFT. Consequently, SAFTs are frequently used to finance the development of blockchain-based projects.
In this blog post, we provide a practical overview of SAFTs in Liechtenstein, discussing their benefits and risks, and explaining why Liechtenstein is an ideal jurisdiction for a SAFT.
1. What is a SAFT?
In simple terms, a SAFT is an agreement between an investor and a startup in which the investor provides capital upfront but does not immediately receive tokens. Instead, the startup promises to issue tokens to the investor in the future, once the project is successfully completed and the tokens have been generated.
2. What are the advantages of a SAFT?
A SAFT offers the following key advantages for the startup:
- Quick access to capital: The startup has immediate access to the funds but is only obliged to transfer the tokens to the investor once they have been generated.
- No repayment obligation: The startup has no obligation to repay the invested capital.
- Flexibility in token issuance: A SAFT allows startups to control the timing of token issuance, ensuring that tokens are only issued once the project has been sufficiently developed.
- Standardization: By standardizing a SAFT, it can be used in the same form for a variety of investors, saving time and costs in negotiating these agreements.
- Better terms for investors: Investors can secure a lower price for the tokens to be developed by entering into the SAFT now, compared to later investors.
3. What risks are associated with a SAFT?
While a SAFT offers many benefits, it also comes with risks.
Investors should be aware that they are investing in a project that is still in its early stages of development. There is a risk that the project may not succeed and that the tokens may never be issued, potentially leading to a total loss of the investment.
4. Do I need a crypto-asset white paper under MiCAR for a SAFT?
Under MiCAR, anyone who publicly offers a crypto-asset (token) in the EEA or seeks its admission to trading on a crypto-asset trading platform must prepare and publish a crypto-asset white paper.
A SAFT generally does not constitute such a public offering but rather an individual agreement between an investor and a start-up. For this reason, a crypto-asset white paper is typically not required for a SAFT.
5. Why is Liechtenstein the ideal jurisdiction for a SAFT?
Liechtenstein has been an early leader in the regulation of blockchain technologies. With the enactment of the “Token and TT Service Provider Act” (TVTG) in 2020, Liechtenstein offers not only supervisory regulations for registration as a TT service provider but also a civil law framework.
These civil law regulations provide unparalleled legal certainty in the transfer of tokens (crypto assets), establishing a legal framework for the issuance and trading of tokens. The TVTG thus ensures legal certainty not only for companies issuing tokens but also for protecting investors’ interests.
6. Conclusion
A SAFT (Simple Agreement for Future Token) offers a flexible financing option for blockchain-based projects in Liechtenstein. By combining immediate capital access with the future issuance of tokens, both startups and investors can benefit from this innovative model.
We are pleased to advise you, whether as a startup or an investor, on the optimal structure of the SAFT, its drafting, negotiations, and implementation.
Get started with us right away—contact us at office@isp.law or use our fully automated booking tool to schedule an initial consultation directly at https://www.isp.law/en/book-an-appointment/, and let us help you with your public offering.
