Over the last few months, StartEngine has become one of the highest-volume equity crowdfunding platforms in the U.S. The platform currently has an impressive 60 companies raising money via equity crowdfunding. Now that it’s got the equity crowdfunding side running smoothly, StartEngine is setting its sights on the fast-emerging world of cryptocurrency.
StartEngine is using existing crowdfunding regulations to allow crypto companies to issue new tokens in a legally compliant way. This is groundbreaking stuff, so I asked StartEngine co-founder and CEO Howard Marks to discuss it with us today. Howard also co-founded Activision, the top video game publisher in the world with a market capitalization of more than $30 billion. He’s now focused on building StartEngine and increasing entrepreneurs’ access to capital.
Without further ado, here’s my interview with Howard.
Adam: What’s the difference between a token and a cryptocurrency, and which are you focusing on?
Howard: A token is a piece of code that holds an asset used for buying a service offering by the issuer of the token. A cryptocurrency is also an asset, but its sole purpose is to hold the value of the asset, and it can be transferred to someone else and does not offer any other function. We are only focused on the securities token market for now.
Adam: Why are you calling your conference the ICO “2.0” Summit?
Howard: We see the initial coin offering (ICO) marketplace quickly changing because of regulation. As of now, companies are issuing tokens using ICOs, and they call their tokens “utility tokens” and claim they are not securities. In the last few months, more than $2 billion has been raised by dozens of companies through ICOs. However, these utility tokens do not exist in most cases.
What the companies are actually selling are tokens that later will be exchanged for a utility token once the service exists. This exchange at a later date means the investor is taking a risk… therefore the token is a security and is regulated by the SEC. The ICO 2.0 is to promote the idea that instead of issuing these tokens without regulation, the industry will come together and embrace and use the existing regulation promoted under the Jumpstart Our Business Startups (JOBS) Act, specifically Regulation Crowdfunding (CF), Regulation A+ and Regulation D 506(c).
