- Tokens should capture on-chain value, while equity should accrue off-chain.
- Regulatory clarity allows founders to experiment with new token models.
- One-asset models with all value on-chain are gaining traction among projects.
The debate over tokens versus equity in crypto is heating up as new policy changes create fresh opportunities for blockchain projects. Over the past decade, many top crypto projects launched during the Gensler era were pushed to focus on equity due to heavy SEC scrutiny.
This regulatory pressure limited the value that tokens could deliver, forcing companies to prioritize off-chain revenue and shareholder interests. Lawyer and CLO at Variant Fund, Jake Chervinsky, emphasized that this is a new era of experimentation. Founders now have the chance to rethink how tokens and equity coexist.
According to Chervinsky, the critical factor for any project is clarity: tokenholders need to fully understand what they own and control. Unlike traditional stock, tokens can provide ownership of on-chain assets, giving holders direct control over protocol revenue, digital assets, and infrastructure without intermediaries.
Defining On-chain Value in Crypto
The report also describes a critical distinction: while token value is driven by on-chain activity, equity is the result of off-chain value capture opportunities. Off-chain value capture can include Ethereum’s EIP-1559 fee burn, or simply the fact that DeFi yields go directly into the treasury.
Then there are royalties on licensed digital assets. These are all transparent, accountable, and completely under the control of the token holders.
The off-chain revenue, such as funds held in banks, service contracts, and other assets that the company possesses, lies with the equity owners. It is essential to note that the separation of funds avoids potential regulation problems and clarifies the responsibilities and rights of each stakeholder.
It is tough for entrepreneurs to design token networks that increase the value on the blockchain while adhering to the evolving SEC regulations.
Also Read: Over 125 Crypto Groups Oppose GENIUS Act Expansion on Stablecoin Rewards
Tokens as the Primary Vehicle for Digital Value
There are some projects pushing the boundaries in a one-asset model where the entire value is retained within the chain and goes to the token only. Morpho is one such project. The one-asset model typically sees the project founders setting up the foundation as a nonprofit/nonstock corporation and transferring control to the tokenholders.
This works well, aligning the interests of the creators and the users, making it easier to govern and reducing potential risks associated with security and other aspects. The owners of the token retain custody and control, and the only role that the companies can play is through services.
Although regulatory issues remain murky, many people now accept the idea of a single asset class, which could pave the way for a future when tokens will be the focal points for ownership of digital assets.
Also Read: Michael Selig Sparks Hope for CFTC’s Crypto Regulation in 2025
