In the works for some time now, the European Commission has published the final report on “Identifying market and regulatory obstacles to cross- border development of crowdfunding in the EU.” The report comes under the Directorate‑General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA).
Authored by a team from the European Crowdfunding Network (ECN) with the assistance of Osborne Clark, the report highlights challenges that currently hobble securities-based and lending-based crowdfunding from scaling across Europe.
Fragmentation, divergent regulatory regimes, disparate approaches to supporting capital formation that boosts economic growth and supports entrepreneurship, is a problem that must be addressed. Having clearly defined pan-European regulatory approach for investment crowdfunding will benefit all yet bespoke national regulations currently stand as a policy barrier.
Oliver Gajda, Executive Director of ECN, commented on the report’s findings;
“Based on the evidence gathered by our work, the European Crowdfunding and Peer-to-Peer finance sector remains characterised by its highly heterogeneous nature, shaped by the different starting points of nascent national markets across the EU. It shows that incumbent regulatory frameworks provide insufficient guidance for digitally mediated market exchange, such as Crowdfunding.”
Dr. Nikos Daskalakis, Senior Lecturer of Finance at the University of Brighton who assisted with the report, stated;
“…despite the demonstrated obstacles to cross-border crowdfunding in the EU, funders and platforms have expressed interest in engaging in cross-border financing.”
To quote the document:
“The complexities that arise as a direct result of diverging regulatory frameworks applying in different Member States can be considerable in a cross-border context.”
The report provides case examples from active crowdfunding platforms and shares the various methods of cross border crowdfunding that is taking place now.
While there is a passporting process available, the reality is “the different national regulatory regimes do not allow for the full passporting of the licence in the Member States.”
The report sets the stage as to how to best empower crowdfunding to serve the European economy. Investment crowdfunding clearly aligns with the broader goal of the Capital Market Union action plan. A proposal for EU regulation of crowdfunding is expected in March 2018.
“We believe that this report is yet another important tool for the European Commission. It provides direct input for a comprehensive and balanced European Crowdfunding regulation and expands beyond the detailed analysis of the current legal framework of Crowdfunding in the EU as already provided in the ECN Review of Crowdfunding Regulation 2017,” said Tanja Aschenbeck-Florange, Partner at Osborne Clarke. “This report provides the European Commission with clear policy recommendations, based on legal and market obstacles evident in cross-border Crowdfunding.”
The report is embedded below.