What is an equity token?

In this article we are going to talk about the Equity token, where the following topics will be discussed: What are Equity tokens, what are the characteristics and finally an example.

What is an equity token?

Equity tokens are actually more of a subgroup of the security token. Security and equity tokens are tokens that represent a tradable security on a blockchain. The difference here, however, is that an equity token is a proof of value of a company, just like a stock or a debt instrument. With an equity token you become co-owner of a certain project. An equity token can therefore be compared to a digital share, but then from a blockchain project.

The Security and Exchange Commission (SEC) is the one that determines whether a token is an investment product or not. This decision is made on the basis of the Howey test. The moment the SEC considers a token as an equity token, the issuer of the token will have to comply with the laws and regulations imposed by the SEC.

Characteristics of equity tokens

The main characteristic of an equity token is that they actually have exactly the same properties as a share, but then on the blockchain. As an equity token holder, you are co-owner of the relevant blockchain project. Being a co-owner also entitles you to control within the company, which in turn depends on the percentage size of your position in the company.

The fact that equity tokens are very similar to stocks bodes well for the future. At the moment there are not many equity tokens in circulation. This is partly due to the fact that there is still a lot of uncertainty in the crypto world regarding legislation and regulations. The legality of equity tokens must be tested on the basis of the laws and regulations within the jurisdiction where the token is issued.
Looking to the future, however, equity tokens are a very safe option for investors to invest. The reasons for this are: regulation, co-ownership and employee participation.

Example

Neufund is the leader in issuing equity tokens. Neufund is a German company that specializes in issuing equity tokens. German law and regulations offer the possibility to legally issue equity tokens. Foreign companies can even issue an equity token with Neufund without a parent or subsidiary in Germany.

The Neufund platform is used for raising funds and financing for companies by issuing equity tokens. Neufund does this using smart contracts and the Ethereum blockchain. The equity tokens are issued through Equity Token Offerings (ETOs).