On 10 November 2023, the European Crowdfunding Service Provider Regulation (ECSPR) came fully into force, marking a transformative moment for the crowdfunding sector across the EU. EUROCROWD, together with its members, has played a pivotal role in shaping this regulation and continues to collaborate with regulatory authorities and leading crowdfunding service providers to ensure its effective implementation. This milestone coincides with sluggish progress in the European Capital Market Union (CMU), as highlighted by the Association for Financial Markets in Europe (AFME) and its partners. Emerging regulations in areas like crypto assets and open finance are expected to intensify competition further, underscoring the need for vigilance in monitoring the crowdfunding sector’s evolution.
As of 10 November 2023, over 90 ECSPR licenses had been granted, with the total rising to more than 110 by the time of publication, according to the European Securities and Markets Authority (ESMA). This rapid growth raises questions about the financial sustainability of unlicensed Crowdfunding Service Providers (CSPs) during the waiting period for approval. The evolving licensing landscape underscores the need for efficient regulatory processes to foster a competitive and resilient market.
Country-Level Dynamics
France leads the EU in ECSPR licenses granted, despite initial delays that prompted lobbying for an extended transition period. The Netherlands, a close second, initially argued that its market size required only a handful of CSPs. Together with Spain and Lithuania, these four countries account for 50% of licensed platforms, highlighting a concentrated competitive landscape. Germany, the EU’s largest economy, has struggled to align its crowdfunding sector with the opportunities presented by ECSPR, a missed chance to leverage EU-wide licensing for market growth.
Despite the regulation’s intent to encourage cross-border competition, CSPs have shown limited interest in pursuing licenses outside their home countries. This hesitation may be influenced by national authorities and legal advisors, who often discourage regulatory “shopping” based on past experiences with directives like MiFID.
Market Performance: Preliminary Data
EUROCROWD’s analysis of 58 ECSPR-licensed CSPs through October 2023 reveals:
- Transactions: 1,296 recorded transactions.
- Value: A total transaction volume of €615.98 million.
- Sector Distribution: Real estate dominates, with technology, energy, food & beverages, and farming showing similar market shares.
While lending outpaces investment in transaction volume, data inconsistencies on CSP platforms complicate definitive conclusions. Many platforms fail to specify the licensing regime under which transactions occur, a violation of ECSPR’s consumer protection provisions. Enforcing compliance in this area will be critical to enhancing market transparency.
The Path to Scalability
The European crowdfunding market is projected to reach €1 billion in 2023 under ECSPR alone. However, the sustainability of 110 CSPs in this ecosystem is uncertain. Cross-border activity remains minimal, and the market is likely to consolidate over the next three to five years as CSPs face rising compliance costs under additional EU regulations such as DORA, AML, and FIDA. Established market actors are expected to raise barriers to entry, further pressuring smaller players to scale or exit.
The European Commission’s upcoming impact assessment of ECSPR and ESMA’s contributions will play a critical role in shaping the sector’s future. Harmonized interpretations of the rules, developed in collaboration with national competent authorities (NCAs), will be essential to reducing legal uncertainties and fostering market stability.
