Main outputs of 7th CrowdCamp Session 3: The state of ECSP Implementation
On 17th June, the third session of CrowdCamp took place. It started with a brief introduction about how the new European crowdfunding regulation may affect the existing market and an explanation of the changes in the sector.
Speakers stated that the future of finance is technology, sustainability and investor preferences, and crowdfunding is the type of finance that brings these three elements together. It was made clear that thinking about the regulation as something detrimental for the market is a mistake, since it will introduce trust into it and will create a framework of investment to operate safely, achieving the harmonisation of the regulation.
The conversation focused on the legal aspects that some platforms need to consider when they want to expand, and the decision-making process involved. There are some crowdfunding platforms interested in expanding the sector to the European market, for this they need to know the jurisdiction and the regulation of each country and choosing the most convenient for them.
They also highlighted the importance of a common language, not only for the harmonisation of the rules but also for the convergency, or in other words, for having the same interpretation of the rules. The concern about the competition that can arise among supervisors to become a service provider came up in this section. To this, it was responded that the regulator should not open the play to the competition since the objective is to work together in the same market. Continuing with the discussion on ECSPR, the current situation shows that a high percentage of the market has not applied for authorisation yet. Therefore, a big risk was identified, as many firms would be out of business on 10th November 2022 if there was no extension of the transitional period.
During this conversation, the role of ESMA was presented. ESMA acts as contact with competent authorities and platforms in order to facilitate the process. For this reason, crowdfunding associations and players need to explain their practices and problems during the application process, so ESMA can understand the market and the practices in the different member states.
One of the aspects highlighted during the discussion was the importance of having a team and a crowd in the country where you are planning to apply for the license. In addition, is important to talk beforehand with the competent authorities of each country and the FMA. Speakers continued analysing the challenges during the application process, like leaving the door open for national law on consumer protection. Regarding this, it was noted that platforms have to think about what the liability in every country is, this makes it difficult to spread it all over Europe. Finally, some platforms claimed that they are still evaluating where the applicability of ECSP is and what they would need to change regarding their business model.