Variant Fund CLO: "Tokens should capture on-chain value, while equity should capture off-chain value."

After Gensler's departure, the winds have shifted… "We are beginning an experiment to redefine the role of tokens and equity."

Jake Chervinsky, Chief Legal Officer (CLO) of cryptocurrency venture capital firm Variant Fund, predicted a restructuring of the industry's value structure on social media the previous day, saying, "The debate over the division of roles between tokens and shares is just beginning."

"Many cryptocurrency projects were born during the era of former SEC Chairman Gary Gensler," Chervinsky explained, "and the intense regulatory pressure at the time forced developers to attribute nearly all of their value to equity rather than tokens."

"The policy environment is now changing, and new opportunities are emerging," he said. "It will take considerable time and experimentation to figure out how, or if, tokens and staking can work together effectively." He added, "This experimental phase is beginning right now."

Chervinsky proposed a clear distinction between the roles of tokens and stakes. He explained, "Tokens should capture on-chain value, while stakes should capture off-chain value." He added, "The core innovation tokens enable is self-sovereign ownership of digital assets."

“Tokens allow holders to directly own and control on-chain infrastructure without relying on off-chain intermediaries,” he said. “However, token holders cannot directly own or control off-chain revenues or assets, so in most cases, this value should be attributed to the stake, not the token.”

However, he suggested a flexible approach, saying, "Other models could also work." Chervinsky said, "Some projects may opt for a single-asset model that doesn't set any equity at all, while others may consider their tokens as tokenized securities, subject to new rules the SEC may develop for that market in the future."

He emphasized in particular that "clarity is always paramount," and that "token holders should know exactly what they own, what they can and cannot control."

"The design space for token value capture is much broader than traditional equity," Chervinsky said, adding that "it will be difficult for a standardized token model like stocks to emerge for a significant period of time."

Meanwhile, Chervinsky made it clear that his comments were not a statement about the recent controversy surrounding Aave, but rather a reflection on structural changes in the industry as a whole.

Joohoon Choi joohoon@blockstreet.co.kr