EUROPEAN CROWDFUNDING LICENSE UNDER NEW ECSP REGULATION. PAN-EUROPEAN CROWD FINANCING

European Crowdfunding Service Providers Regulation (ECSP) came in force on 10 November 2021. New regulation predicts crowdfunding boom in continental Europe. European Union is the World’s biggest common market having 450 million consumers and more than 20 million businesses. Regulation creates common crowdfunding rules and the single license “passporting” regime in all European Union and European Economic Area (EU/EEA) allowing provision of crowdfunding services all across common market holding license issued in one country.

The aim of the new ECSP regulation is to support cross-border funding and improve access to this innovative form of finance for small medium enterprises (SMEs) and start-ups. European banks and other traditional lenders are not able to finance all businesses because of the risk regulations and other risk mitigation and regulatory restrictions. Crowdfunding platforms provide a marketplace for other lenders to fill the gaps in business financing. The interest rate paid by the crowdfunding and P2P financing platforms to the investors is usually higher than that paid by the traditional financial institutions. Crowdfunding is the ideal financing tool for start-up financing which allows the lenders to get the share in start-ups, lend them through loan agreements, securities and token issues.

Raise of capital through loan agreements, bonds, stocks, other securities and Token offerings

Licensed Crowdfunding platform operators are permitted to finance their client companies through crowdfunding platforms using different instruments:

• loan agreement
• issue of debt securities (i.e. bonds)
• issue of equity securities (i.e. shares) or any other securities
• assignment of claim rights deriving from existing credit agreements

Pan-European Crowdfunding license under the new ECSP Regulation for all Europe

Lithuania is one of the first  EU/EEA jurisdictions introducing fully passportabe pan-European Crowdfunding license under the new Regulation on European Crowdfunding Service Providers (ECSP). All the applicants currently applying for the license in Lithuania may get licenses of pan-European reach. Licensed crowdfunding platform operators are considered as licensed financial advisory firms and do not require additional licensing.

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