We sat down to talk with finance and credit card expert Alex Gerasimov, CEO of RAD Lending Inc. to clear up some misconceptions behind utility tokens, securities, and what risk investors take by playing their part of the game.

Let’s cut right to the chase. During our pre-interview discussion, you demonstrated quite a negative outlook towards utility tokens. Where does this come from?

No, I think you misunderstood me. I’m a big fan of the truly utility tokens. This is something that the whole blockchain magic is based on – when lot of nodes act with they own economic interests and it creates these unique and beautiful token economies that does not exist in our conventional finances and business with their limited communication possibilities.

The issue is that in so many cases the utility token is used as a misleading term to cover up an investment activity. And with regulators around the world starting to to pay attention, this puts the whole crypto movement at risk. It is time when you need to grow up and play by the rules, if you want to step into the world of grown up businesses.

Can a clear line be drawn between utility and security tokens?

This is where I need first to make clear that I’m not a legal professional and express only my opinion and our company view. I was really interested in the topic of a legal ICO for the last year and a half, when this whole discussion utility vs security started to emerge, and everyone in crypto started to learn these new words “Howey test”.

I oftentimes see ICOs basing their legal status on a spreadsheet that is circulating online, which calculates a so called “Howey score”, hoping that this document will protect them. The catch is that this original document is criminally outdated, and even if it was up to date, a simple Google Spreadsheet cannot be used in 2018 in lieu of normal legal research. It is very dangerous for all parties involved.

At the same time the general idea of a Howey test issue is logical and easy to understand if you are unbiased. I visited many informative discussions with legal people, people from a traditional VC world and crypto crowd and some very interesting comparisons were made.

For example, if you sell tickets for the next RHCP show and someone buys it and then sell it to another guy for a profit – will it be a security? Obviously not. But what if you sell tickets for a non-existent band in order to gather a band, record a couple of hits and then build a stadium to have a concert there? That is more in line with what we see in crypto.You get the analogy – if something is nonexistent or needs lot of efforts to develop, market and run – this is not something you can call utility, because there is no utility in it yet. Obviously, people buy in to get a return later from the work of your team – this is an investment.

Even with a clear differentiation between utility and security, many claim that is not the whole point of the debate. What do you say to those voices, who say that cryptocurrencies and blockchain, by nature, should not be tied down in regulatory debates? Simply put, if you can have a company registered offshore, why bother what the SEC thinks?

I’m with those who want cryptocurrencies and blockchain unregulated. I really like the pure idea of blockchain – it has the potential of changing the World and it is doing it as we speak.

Literally, I recently met with colleagues from the world largest international organization and we had a talk about blockchain in general and our RAD Lending ideas and I suddenly came to realisation that the whole crazy large organisation could be easily and reliably replaced by a smart contract logic on the permissioned blockchain if only all stakeholders will put their trust (and funds) into such system.

However, the world we live in runs with some rules. And these rules are actually enforced in our physical world (unlike many rules in the smart contract).

Another point to mention – it is in fact very difficult to talk with a traditional business when being in crypto – partnerships, services – all is harder to get if you are a crypto company. I want this bias to fade away, we need adoption, we need partnerships, we need to get out of our small (but growing) crypto community – and to do it we need to learn how to play by the rules to some extent.

Since you mentioned it, let’s talk legality. Would you recommend every crypto startup to lawyer up? Or is it just a necessity for the US market?

Also, rewinding back a bit, you comments on offshore in the previous question. You can literally start a company somewhere on the islands and do any type of the ICO you want and then live happily with the crypto you got. Unless you want to create a real business, you want to have partnerships, you want product and you want to get away from this damned island. That is when you need to think about compliance but it is too late. And even if you are ok on this island, one day you can see a bunch of Agent Smiths coming because one of your investors (or rather utility token buyers) was a US person.

So in our case it was not a question that we start as a legal US entity and do everything right from the beginning. You do not even realize how much it is different and harder to do than just to publish an ETH address on your website and announce an ICO. It is a different league organization-wise.

And I definitely do recommend every crypto startup to lawyer up as you suggested. It is your duty to your investors – unless you do everything right it is their money on the line – no one will get any good ROI if all company funds will get seized.

Crypto companies are dealing with serious money these days. No one collects millions into the plastic bag in front of the metro station – both criminals and authorities will get too interested. Sounds obvious with the plastic bag analogy, but you see it every day in crypto.

At the end of the day, who holds all the risk and who are the real winners? The investors or the token issuers?

Let me put it that way. I do believe that all crypto startups out there are willing to change the world. The truth is that some of them might face troubles on that route because they were not cautious enough to organize things right from the very beginning. And in this unfortunate case, it is the investors who will get hurt.

For us, it is about being here for the long run. We see there is an enormous opportunity in combining conventional finance with the opportunities of the blockchain. We believe in making crypto a part of personal finance for a wide audience of modern consumers. The adoption is happening as we speak, but we know how to make crypto-based financial products convenient, safe and superior to conventional finances.

And we think we know how to make it happen.

Alex is an IT manager with 10+ years of experience in government and private sectors. He led multi-million dollar projects for International Monetary Fund, Central Bank of Russia and commercial banks. Experienced in banking and finance, IT management, digital marketing. Internet entrepreneur with several projects under the belt, including the latest project, RAD Lending.

(This interview originally appeared on CCN.com)