On March 8, as part of its Fintech action plan, the European Commission has published a proposal for a regulation on European crowdfunding which will enable the crowdfunding platforms to provide their services across the EU. We are currently analysing the proposal in-depth, seeking clarification on some aspects and will continue to provide input to the political discourse further shaping this Proposal. ECN will issue a detailed statement in due course.
The EC argues in its proposal, that crowdfunding improves access to funding especially for start-ups and other small businesses. A start-up can present its project on an online platform and call for support in the form of a loan (‘peer-to-peer lending’) or equity. Investors receive a financial return for their investment. It is currently difficult for many platforms to expand into other EU countries. This is why crowdfunding in the EU is underdeveloped as compared to other major world economies, and the EU market is fragmented. One of the biggest hurdles is the lack of common rules across the EU. This considerably raises compliance and operational costs and prevents crowdfunding platforms from expanding across borders.
Jyrki Katainen, Vice-President for Jobs, Growth, Investment and Competitiveness said: “New technologies are transforming the financial industry by revolutionising the way people access financial services. Alternative sources of funding, such as crowdfunding or peer-to-peer lending, directly link savings with investments. They make the market more accessible for innovative entrepreneurs, start-ups and small companies. This objective is at the heart of the Capital Markets Union.”
This proposal is designed to make it easier for crowdfunding platforms to offer their services EU-wide and improve access to this innovative form of finance for businesses in need of funding. Once adopted by the European Parliament and the Council, the proposed Regulation will allow platforms to apply for an EU label based on a single set of rules. This is hoped to enable them to offer their services across the EU. Investors on crowdfunding platforms will be protected by clear rules on information disclosures, rules on governance and risk management and a coherent approach to supervision.