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).

Adam: What’s on the agenda of your ICO summit next month?

Howard: Our agenda is to first discuss what a regulated ICO is, how to value a security token from the investor’s perspective, how to decide if the token is a security or not, and how the trading of security tokens will work on the blockchain.

Adam: Tell me how a new crypto company could do a token sale using your platform.

Howard: The company has three choices to pick from. It can use CF and raise up to $1.07 million per year. This is very low-cost and fast to launch. The tokens can be sold to the general public under clear requirements. We provide this in our platform. These tokens will be restricted from being sold for one year, per the rule.

The company can also choose Regulation A+, which permits it to raise up to $50 million per year. However, it will incur higher legal fees and will need to perform a two-year audit (less if the company is younger), then submit its offering memoranda to the SEC for review and later qualification. This can take several months and costs more than $100,000 in professional fees.

Finally, it can choose Regulation D 506(c) and only sell to accredited investors who are wealthy people earning more than $200,000 per year or who have more than $1 million in assets outside of their primary residence.

Each investor needs to be reviewed and qualified by the company, which can be frustrating and time-consuming for the investors. There is no limit on the raise, but the investors can only sell these securities to other accredited investors subject to the rules of the purchase agreement.

Adam: How do you issue tokens as securities?

Howard: There are two ways. The first way is to create a new class of either common or preferred shares for the company and then issue these shares using CF or Regulation A+. StartEngine will give each investor a wallet containing these security tokens.

The second way, by all means not limited to this one, is to issue a limited number of tokens that later will be exchanged for a utility token that has an actual function. This is similar to purchasing a gold futures contract and, when the time elapses, being delivered the gold.

Adam: Will token companies be able to issue dividend tokens?

Howard: Yes, dividends are possible by offering additional fractions of the same security token to the investors.

Adam: Tell our readers about your plans for a token secondary market.

Howard: We recently released the StartEngine Secondary website, which permits investors to post the sale of securities they wish to sell. Right now this is very new, and we have only a few companies listed, but soon we will have dozens and then hundreds.

Adam: I recently saw that you’re launching an offering of StartEngine shares soon. Tell us a little more about this deal.

Howard: Yes, we are planning to be qualified by the SEC, and prospective investors are invited to view our campaign page and read the offering memoranda.

Thanks to Howard for taking the time. To learn more about StartEngine’s ICO Summit, which takes place November 10 in Santa Monica, California (and will be live-streamed), go here.