Across Protocol Proposes Token-to-Equity Shift

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Across Protocol’s recent temporary-check governance proposal, reported by The Block on March 23, 2026, has accelerated a debate long simmering in decentralized finance: can token-based networks transition to conventional equity structures without undermining utility, governance, or regulatory status? The proposal — which asks token holders to signal preferences on pathways that could include equity issuance to project contributors and backers — forces institutional investors and regulators to reconcile token economics with corporate governance norms. The conversation is not theoretical: DeepDAO recorded approximately 6,300 DAOs as of December 31, 2024 (DeepDAO), and governance token concentration studies from 2022–24 show that top holder groups frequently control 35–60% of voting power (industry governance reports). Those data points frame a market where token voting outcomes can have outsized influence yet lack the legal accountability mechanisms standard in equity markets. This article dissects the data, the mechanics behind token-to-equity maneuvers, sector implications, and attendant risks for institutional allocators and policy makers.

Context

Across Protocol’s temp-check surfaced at a moment when the crypto industry is under heightened regulatory scrutiny and capital discipline. The Block published its item on March 23, 2026, flagging that the proposal is a non-binding signal to stakeholders rather than an enforceable corporate act (The Block, Mar 23, 2026). That nuance matters: a temp-check allows projects to take the temperature of token holders before committing to legally-binding steps. For institutional observers, the difference between signaling and binding conversion is central to how any token-to-equity shift would be structured from a legal and accounting standpoint.

The broader market context includes a multi-year retrenchment in crypto venture financing and acute regulatory enforcement in major jurisdictions. PitchBook and other industry trackers documented a sharp contraction in venture capital into crypto companies after 2021; aggregate yearly funding fell materially in 2022 and 2023 versus 2021 levels (PitchBook, 2023). That macro slowdown has increased incentives for protocols to seek alternative capital structures that align long-term contributors with project survivability.

At the same time, DAO proliferation has expanded the scope of experimentation. DeepDAO’s estimate of ~6,300 DAOs as of end-2024 suggests a vibrant but fragmented on-chain governance ecosystem (DeepDAO, Dec 31, 2024). Many DAOs underpin protocols with active users, treasuries, and developer teams — features that create both the need and the possibility for hybrid governance or capital structures that resemble equity while preserving token utility.

Data Deep Dive

Token holder concentration remains one of the most relevant empirical constraints on any token-to-equity conversation. Industry governance studies from 2022–2024 show that the top 10 wallet clusters or addresses frequently control 35–60% of governance weight across major protocols, a concentration that skews outcomes and complicates claims of decentralization (Governance Reports, 2022–24). That concentration affects the plausibility of broad consensus for structural shifts: if a small cohort can determine the outcome, converting tokens into equity could entrench incumbents rather than distribute ownership more widely.

Treasury sizes and token supply schedules are additional hard constraints. Many large layer-2 and bridge projects maintain on-chain treasuries denominated in native tokens and major stablecoins; rebalancing those assets into fiat or equity considerations requires both governance authority and counterparty mechanisms. For institutional due diligence, the portfolio composition of those treasuries — for example, token vs stablecoin vs external asset exposures — will dictate the feasibility and timing of any conversion pathway.

Regulatory data points are important and measurable. Since mid-2023, enforcement actions and guidance from major regulators in the U.S. and Europe have increased the legal uncertainty of token classifications. While regulators have not produced a unitary test that forces token-to-equity conversions, the trajectory of enforcement suggests that projects weighing blurred economic rights (yield, revenue share, or profit allocations) may face higher compliance costs if they remain purely tokenized. The Block’s coverage of the Across temp-check (Mar 23, 2026) explicitly frames the proposal as a response to commercial and legal incentives, not merely governance flair.

Sector Implications

A credible token-to-equity pathway would reshape corporate-financial interfaces for crypto-native enterprises. For venture investors and traditional asset managers, equity instruments bring familiar rights — fiduciary duties, audited financial statements, and liquidation preferences — that tokens generally lack. Conversion, therefore, can create a bridge to institutional capital that values governance clarity. Conversely, issuing equity can erode the network effects and incentive alignment that token economics were designed to achieve, particularly where utility or staking functions drive protocol security and user behaviour.

Comparatively, tokens and equity serve different demand profiles. Tokens can monetize usage, capture protocol-level fee streams, and enable on-chain governance; equity captures future cashflow claims and provides shareholder protections. Historical fundraising patterns show that token-based capital raises surged in certain cycles while traditional VC and equity rounds have been more cyclically stable. For example, venture funding to crypto fell materially after the 2021 peak (PitchBook, 2023), increasing the attractiveness of hybrid or equity-like capital structures for long-term resiliency.

Peer dynamics will matter. If Across proceeds with a structured pathway that offers equity to contributors or early backers, competing protocols may face pressure to offer similar terms to retain talent and capital. That could trigger a wave of conversions or create two-tiered ecosystems — some projects that remain token-native and others that hybridize. Institutional counterparties will watch for precedents on valuation, governance dilution, and legal mechanisms used in those transitions.

Risk Assessment

Legal and regulatory risk is the primary axis of concern. Converting tokens to equity — or issuing equity alongside tokens — triggers securities law regimes in many jurisdictions, potentially exposing issuers, contributors, and major token holders to registration, disclosure, and fiduciary obligations. The absence of standardized frameworks increases compliance costs and litigation risk. For institutional investors, the timing and clarity of regulatory guidance will be determinative of whether participation in token-to-equity transitions is operationally or reputationally acceptable.

Operational risk is non-trivial. Implementing a conversion requires legal entities, cap tables, valuation methodologies, and often third-party custodians. Smart contract states may not map cleanly onto legal constructs: on-chain governance outcomes may be non-binding or vulnerable to governance attacks. The governance concentration noted earlier (top holders controlling 35–60% of votes in many cases) raises the risk of contested conversions and minority holder disputes which, absent established legal protections, could result in value destruction or protracted litigation.

Valuation and accounting pose additional hazards. Protocol treasuries denominated in volatile tokens mean that any equity claim must be priced against fluctuating asset values. Accounting standards for tokenized revenue and equity-like instruments are still evolving; missteps could produce restatements, impairments, or uncertainty in financial reporting that would concern institutional investors and auditors alike.

Fazen Capital Perspective

Fazen Capital views the Across temp-check not as an isolated governance curiosity but as a pragmatic market signal: institutions and protocols are increasingly seeking hybrid solutions that map economic rights onto legal frameworks. Our contrarian reading is that token-to-equity moves will not be binary nor universal; rather, expect a stratification where mid-market and governance-heavy protocols selectively adopt equity mechanics while pure public-utility tokens retain native structures. This bifurcation will likely manifest over a multi-year period rather than in a single wave.

We also highlight an underappreciated operational arbitrage: projects with sizeable on-chain treasuries and diversified tokenomics are better positioned to negotiate conversions on favorable terms because they can offer liquidity pathways, locked-up equity tranches, or token buybacks that smooth dilution effects. In practice, this will create winners and losers among protocols depending on treasury composition and governance centralization. Institutional participants should therefore prioritize forensic treasury analysis and governance-weight concentration metrics when engaging in this space.

Finally, we suggest practitioners monitor cross-jurisdictional legal structuring and precedent cases closely. A handful of well-documented, legally robust conversions that withstand regulatory scrutiny would materially lower the execution risk for subsequent transactions and open a broader institutional playbook. For further reading on governance metrics and capital structures, see our research hub at topic and our notes on protocol treasury analytics at topic.

Bottom Line

Across Protocol’s March 23, 2026 temp-check crystallizes a sector-level negotiation between token utility and legal accountability; the path to hybrid capital structures will be incremental, precedent-driven, and dependent on governance concentration and treasury composition. Institutions should track governance metrics, legal precedents, and treasury composition as leading indicators.

Disclaimer: This article is for informational purposes only and does not constitute investment advice.