A Framework for European Crowdfunding

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A Framework for European CrowdfundingThis paper, published in association with the European Crowdfunding Network, is structured to give a concise overview of the state of crowdfunding in Europe, with the aim of establishing policy and a distinct framework for the European crowdfunding industry, efforts which we believe will aid in the economic recovery of Europe. There is currently no established policy in Europe for crowdfunding and we believe it is of the utmost importance to create crowdfunding legislation to remain competitive in a global market.

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To maintain the integrity and proper ethics of crowdfunding in Europe, we believe it is essential to create a framework of best practices and suggest a three pillar approach.

– The first pillar is regulation; until legislation is enacted, crowdfunding intermediaries should establish criteria focusing on the following categories of consumer protection: operational and financial transparency practice, financial control, security of information and payments, platform functionality, and operational procedures. These will assist in fraud prevention and detection and will signal credibility to individual funders.

– The second pillar is education; for crowdfunding to flourish, we believe a pan-European educational forum is necessary to educate stakeholders, funders, and entrepreneurs on the benefits of the industry, and the different business models of crowdfunding. These forums will provide a reasonable and fair guide to protect the financial interest, exposure and diversification of funders and investees across multiple crowdfunding business models. This needs to provide guidance around fraud, risk explanations and potentially the testing of funders’ knowledge.

– The third pillar is research; we believe the industry should drive academic and third party research. We believe crowdfunding operators should provide data sets to further industry research; the industry needs to find a transparent and open approach. Public reporting and research will drive competition and innovation within the industry. Finally, European, national and local legislators and policy makers should join forces to establish crowdfunding-enabling legislation in Europe. In this paper, we outline a number of potential policies and regulations which we believe offer a good starting point for a broader discussion. We hope to see many of these thoughts adopted for the benefit of the European economy.

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