What is SAFT?
A SAFT (Simple Agreement for Future Tokens) is an investment contract in which investors fund a crypto project today in exchange for tokens delivered later - typically at network launch, at a discount to the public price. Modelled on the SAFE, it is the standard instrument for private token rounds.
How SAFTs work in practice
The investor wires funds (fiat or stablecoins) to the issuing entity; the SAFT defines the token price or discount, delivery trigger (TGE - token generation event), vesting and lockups, and what happens if the network never launches (usually a limited refund from remaining funds, often nothing). Key negotiated terms: discount to public price (commonly 20–50% for early rounds), cliff and linear vesting (12–36 months post-TGE is typical), and most-favoured-nation clauses. Issuers should model the fully diluted token supply across all SAFTs before signing - overselling future supply is the classic cap-table disaster in token form.
The securities-law reality
The SAFT itself is a security in the US - sold under Reg D to accredited investors or Reg S offshore. The original SAFT theory hoped delivered tokens would not be securities; US enforcement history since has shown regulators may treat the tokens as securities anyway. Practical consequences: restrict US sales to accredited investors with transfer restrictions, or exclude US persons entirely under Reg S with real geoblocking and attestations. In the EU, tokens delivered under a SAFT still face the MiCA white-paper analysis at public launch.
Issuing entity and structure
The market standard is a dedicated token-issuing entity separate from the development company - commonly BVI (token issuers) or Cayman (foundation companies for larger projects), with Panama occasionally used. Separation ring-fences token liabilities away from the operating company holding contracts and employees, and gives investors a clean counterparty. The SAFT, the token allocation plan, and the issuer's corporate documents should tell one consistent story - mismatches surface in exchange listing due diligence.
Frequently asked questions
SAFT vs SAFE - what is the difference?
A SAFE converts into equity; a SAFT converts into tokens. Many projects run both in parallel: a SAFE for equity in the development company and a SAFT (or token warrant attached to the SAFE) for future tokens from the issuing entity.
Which entity should sign the SAFT?
The token-issuing entity - typically a BVI company or Cayman foundation set up specifically to issue the token - not the operating development company. Investors and exchanges expect this separation, and it isolates token-related liability.