European Commission takes actions to promote Europe as a more attractive place for start-ups by introducing new regulations on crowdfunding. Commission has proposed a draft regulation to enable crowdfunding platforms to access customers across the EU.
The executive arm of the EU revealed an action plan that looks to tap into rapid advances in new technologies such as blockchain, artificial intelligence and cloud services. European Commission also has proposed a draft law offering crowdfunding platforms bloc-wide access to customers. The current problem with crowdfunding in Europe is the fact that there are no bloc-wide laws, which means start-ups are acting with national rules, which are often slowing
New regulations will make the markets safer and more accessible to new companies. This includes rules for crowdfunding to help platforms to act within whole European Union, so operators will be able to operate across the entire bloc under one set of regulations. According to Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union, “an EU crowdfunding licence would help crowdfunding platforms scale up in Europe. It will help them match investors and companies from all over the EU, giving more opportunities for firms and entrepreneurs to pitch their ideas to a wider base of funders“.
The EU draft regulation from the European Commission introduces pan-EU regime – a crowdfunding platform that wants to operate across the bloc could obtain a “passport” license from the European regulators. The draft rules cover crowdfunding “campaigns” of up to a million euros over 12 months. Raising higher sums would come under the bloc’s existing prospectus and securities rules.
UK Crowdfunding platforms are looking for new jurisdictions to get their EU “Passports” after the BREXIT
The decision is especially important in the context of BREXIT as Britain leaves the bloc soon with its own crowdfunding licensing regime. It is already clear that UK-based financial companies won’t be able to serve EU customers from Britain. “It’s more important that we develop capital markets across the EU as there are going to be consequences from the EU’s largest market leaving the EU,” Dombrovskis said.
UK licensed financial service providers are already searching for the new jurisdictions, in order not to lose their access to European common market of 500 million consumers. “Lithuania is undoubtedly one of the most attractive Crowdfunding jurisdictions in Europe due to its excellent infrastructure and brand new Crowdfunding Law”, – says Kestutis Kvainauskas attorney-at- law at ECOVIS ProventusLaw in Vilnius, Lithuania. Once adopted by the European Parliament and the Council, the proposed regulation will allow platforms to apply for an EU label based on a single set of rules. This will enable them to offer their services across the EU. Investors on crowdfunding platforms will be protected by clear rules on information disclosures, rules on governance and risk management and a coherent
approach to supervision.
“Lithuania is undoubtedly one of the most attractive Crowdfunding jurisdictions in Europe due to its excellent infrastructure and brand new Crowdfunding Law”, – says Kestutis Kvainauskas attorney-at- law at ECOVIS ProventusLaw in Vilnius, Lithuania.
Crowdfunding improves access to funding especially for start-ups and other small businesses. A start-up can present its business plan on an online platform and call for support in the form of a loan or (‘peer-to- peer lending’)equity. Investors receive a financial return for their investment. It is currently difficult for many platforms to expand into other EU countries. This is why crowdfunding in the EU is underdeveloped as compared to other major world economies, and the EU market is fragmented. One of the biggest hurdles is the lack of common rules across the EU. This considerably raises compliance and operational costs and prevents crowdfunding platforms from expanding across borders.
European Crowdfunding license already exists
“European Crowdfunding license already exists and you can get it within 30 business days from the Bank of Lithuania“, – says Kestutis Kvainauskas attorney-at- law at ECOVIS ProventusLaw in Vilnius, Lithuania. The new Lithuanian Law on Crowdfunding makes Lithuania one of the few jurisdictions in Europe having modern, clear and transparent crowdfunding regulation. Securities issued by licensed crowdfunding platforms are tradable in all EEA/EU, making it possible to attract capital for crowdfunding needs from all around Europe. Passporting of Crowdfunding license within the EU/EEA area is technically possible combining the Crowdfunding license together with Securities Broker licenses “passportable” under MIFID directive or other “passportable” financial license.
Modern Crowdfunding instruments like ICO, STO and other token offerings available now
Lithuanian licensed Crowdfunding operators permitted to raise a capital through their crowdfunding platforms using Initial Coin Offerings ICO, Security Token Offerings STO on blockchain and other modern instruments. This opens completely new opportunities for fundraisers license their ICO’s, STO’s and token offerings for distribution through the Lithuanian Crowdfunding platform to investors all over the European Union.