- Why the crypto equity vs token debate is redefining blockchain projects. Understand how each model impacts value, governance, and innovation today.
- Jake Chervinsky, Chief Legal Officer at Variant Fund, emphasizes that this conversation is just beginning.
- Many leading blockchain companies were founded amid regulatory uncertainty, leading to a preference for traditional equity.
- Tokens existed in a gray area, leading founders to limit their potential.
- Changing regulatory attitudes are creating new opportunities for token usage and coexistence with equity.
The conversation around crypto equity vs token structures is no longer a niche legal debate held behind closed doors. It has become one of the most important and defining discussions shaping the future of blockchain innovation. As crypto markets mature, regulatory scrutiny increases, and projects evolve beyond experimentation into real-world businesses, founders, investors, and users are asking tougher questions: Who owns what? Where does value actually live? And how should that value be distributed fairly and legally? This debate gained fresh momentum after comments shared by Jake Chervinsky, Chief Legal Officer at Variant Fund. Chervinsky’s perspective highlights a critical reality—this conversation is not ending anytime soon. In fact, it is only just beginning.
A Market Shaped by Regulation Before It Was Ready
To understand why the crypto equity and token debate is so complex, it helps to look back at how many crypto projects started. A large number of today’s leading blockchain companies were founded before former U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler took office. During that period, regulatory uncertainty was intense, and enforcement risk was high. Because of this pressure, many projects made a strategic decision: push as much value as possible into traditional equity, while keeping tokens limited in scope and function. Equity was familiar. It was legally tested. It offered clearer ownership rights and was easier to explain to regulators and investors alike. Tokens, on the other hand, lived in a gray area. Were they utilities? Were they securities? Were they something entirely new? With no definitive answers, founders often played it safe—even if that meant limiting the full potential of blockchain-native ownership models.
Why the Conversation Is Changing Now
According to Chervinsky, the industry has reached a turning point. Regulatory attitudes are slowly evolving, enforcement-first strategies are being questioned, and policymakers are beginning to acknowledge that tokens are not simply stocks with different technology. As policies change, new opportunities are emerging. But Chervinsky is clear about one thing: these opportunities will not unlock overnight. They require time, experimentation, legal clarity, and careful coordination between builders, lawyers, and regulators. The central question is no longer whether tokens or equity are “better,” but how they can coexist without undermining each other.
Understanding What Token Holders Really Own
One of Chervinsky’s strongest arguments centers on clarity. Token holders, he says, must have a clear understanding of three things:
- What they own
- What they control
- What they do not control
This may sound obvious, but in practice, it has been one of crypto’s biggest failures. Many users buy tokens without fully understanding their rights—or lack thereof. Some assume tokens grant governance power, revenue rights, or ownership claims that simply do not exist. Unlike traditional shares, tokens can represent a wide range of value models. They might provide governance voting rights, access to a protocol, staking rewards, or pure utility. This flexibility makes tokens powerful—but also confusing.
Tokens Are Not Just Digital Stocks
A critical insight from Chervinsky is that tokens should not be forced into a single standardized model, the way stocks are. Traditional equity follows well-established legal templates. Tokens, by contrast, are programmable and dynamic. This means the potential design space for tokens is far larger than anything seen in corporate finance. Tokens can:
- Enable decentralized governance
- Power on-chain economies
- Represent access rather than ownership
- Incentivize participation rather than investment
Because of this flexibility, Chervinsky believes a single “token standard” similar to stocks is unlikely to emerge anytime soon. And that may actually be a strength rather than a weakness.
On-Chain Value vs Off-Chain Value
At the heart of the crypto equity vs token discussion lies a crucial distinction: where value lives. Chervinsky argues that tokens are best suited to hold on-chain value. This includes control over decentralized protocols, smart contracts, and blockchain-based systems. Tokens allow users to directly interact with and govern these systems without relying on intermediaries. This direct ownership model is one of crypto’s most revolutionary ideas. It enables users—not corporations or centralized platforms—to control digital infrastructure. Off-chain value, however, is different.
Why Equity Still Matters
Off-chain value includes things like:
- Revenue from traditional businesses
- Intellectual property
- Physical assets
- Legal contracts
- Employment relationships
Token holders generally cannot directly own or enforce claims on these assets. That responsibility usually falls to equity holders, who operate within established legal frameworks. In most cases, Chervinsky suggests, off-chain value should remain tied to equity. This separation helps avoid legal confusion and protects both token holders and companies from unrealistic expectations. Still, he acknowledges that this is not the only possible model.
Alternative Structures Are Emerging
The crypto industry has never been short on experimentation, and ownership structures are no exception. Some projects may choose to:
- Operate entirely without equity, relying solely on tokens and decentralized governance
- Treat tokens as securities, fully complying with future SEC rules
- Blend equity and tokens in novel ways, with clearly defined roles for each
If the SEC introduces new regulatory frameworks tailored specifically for digital assets, these hybrid models may become more common—and more legally viable.
The Regulatory Wild Card
Regulation remains the biggest unknown. While enforcement actions have dominated headlines in recent years, there is growing pressure on regulators to provide clear, workable rules rather than relying on punishment after the fact. If clearer token regulations emerge, they could unlock innovation that has been frozen by fear and uncertainty. Builders would be able to design token systems with confidence, and users would have a better understanding of their rights. This is where the crypto equity vs token debate becomes more than theoretical. It directly influences how projects raise funds, distribute power, and build trust with their communities.
The ongoing debate around crypto equity vs token structures reflects a broader maturation of the blockchain industry. What began as a reaction to regulatory pressure is now transforming into a thoughtful reassessment of ownership, value, and control. Jake Chervinsky’s insights underscore the need for clarity, patience, and innovation as tokens and equity find their respective places in crypto’s evolving ecosystem. Rather than forcing old financial models onto new technology, the industry has a rare opportunity to design something better—systems that balance decentralization with legal certainty, and innovation with responsibility.
Disclaimer: CryptopianNews shares this for learning and info only. It’s not meant to be financial or investment advice. Crypto markets change a lot and move quickly. Investing in them can be risky. You should always look into things yourself. Talk to a trained financial advisor before making any choices about investing.
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