20 October 2017, Brussels/Vilnius. The European Crowdfunding Network AISBL today published its third comprehensive review of European regulatory frameworks in Europe, North America and Israel. The report “Review of Crowdfunding Regulation 2017. Interpretations of existing regulation concerning crowdfunding in Europe, North America and Israel” (PDF 6MB) provides an overview of legal interpretations of current regulatory approaches to crowdfunding, especially securities (equity) and lending (P2P) based models from specialist Law firms in each of these markets.

Regulatory challenges

This third edition of our Review of Crowdfunding Regulation published at the end of 2017 marks five years since we first commented the European regulatory landscape for crowdfunding and four years since our cooperation with law firms across Europe and beyond to deliver this detailed overview.

In those five years we have witnessed some 11 EU countries implement national-level regulations for securities-based and lending-based crowdfunding, as well as in other markets. This has helped to create local markets and first professional standards. It has not helped to create a European market that would allow investors to allocate assets across borders easily, and it did not help small and medium-sized companies to raise funding from those investors.

With the economic growth and increasing importance especially for start-ups and SMEs also the regulatory challenges of Crowdfunding gained weight on national and especially European level. The rag rug of national Crowdfunding regulation not only results in unfair European playing fields for Crowdfunding stakeholders but also hampers further economic growth for cross-border offers of Crowdfunding. This third edition of the ECN Crowdfunding Review 2017 demonstrates the development of Crowdfunding regulation in the EU as well as shows the developments made in third countries important for Crowdfunding. Also, this edition focuses on cross-border Crowdfunding which as described is becoming increasingly important.

Yet, the discussion around crowdfunding has resulted in detailed regulatory actions in many countries and to a deeper understanding of crowdfunding in the European institutions. We also have seen very positive and specific regulatory actions regarding crowdfunding at EU level, specifically in the new Prospectus Regulation.

Trends

Today, when we talk about crowdfunding, we of course also talk about alternative finance, fintech, initial coin and token offerings, and digital platforms. The scope of what crowdfunding was five years ago has changed at least in the use of terminology.

Regulation cannot create safeguards for every situation. It can only create a framework in which professional businesses can operate and investors can find a relevant level of risk protection. Within such framework, the crowdfunding sector must establish its own professional sets of behaviours, in alignment with different stakeholders and lawmakers. For the crowdfunding sector, this remains an increasingly difficult challenge.

We, therefore, ask policymakers and regulators, both on national and European level, to engage in a dedicated discourse. We need to work on the framework and conditions for success that will ultimately enable our entrepreneurs, innovators and our private investors to help build a growing economy across Europe and within each member state. Education, equality and economic success may help to eliminate some of the political frictions that have flared up over the past two years.

The work of the European Commission on the Capital Market Union (CMU) will likely contribute to a better allocation of private funds and, as a consequence, to the development of small and medium-sized enterprises which in turn will again lead to increased job creation. Crowdfunding has a dedicated part in the CMU and we shall expect specific actions addressing cross-border transactions by the European Commission by early 2018.