A Single EU Crowdfunding Regulation Closer to Reality?

S4F New European P2P Regulation @ SavingsForFreedom
Regulation of P2P platforms remains in its infancy. The EU wants to solve this problem by proposing harmonization rules and protection mechanisms for investors.

New EU Crowdfunding Regulation: 1 out of 3

The regulation of crowdfunding platforms in the European Union (EU) remains in its infancy. To support the industry growth, the European Parliament and Commission are discussing for more than two years now how P2P platforms seeking to offer their services to users across the EU can have a set of harmonized rules and how investors can get additional information.

This will be a series of 3 articles on the subject: this one will address the EU Regulation objectives. Then we will explore the implications for P2P platforms and P2P investors if this text is adopted, since the objectives are to lower the high operational and compliance costs for the first and increase the investments security for the second.

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A Long Road towards a EU Regulation

On 8 March 2018, the European Commission submitted a proposal for a new regulation on European Crowdfunding Service Providers for Business. Now, over two years later, the final compromise text has been published.

Currently, it is difficult for many P2P platforms to expand their operations into other EU countries, largely due to the lack of common rules across the EU. This is why crowdfunding in the EU is relatively underdeveloped as compared to other major world economies. In December 2019, the European Parliament and the Council reached a provisional political agreement on a new Regulation which permits P2P platforms to apply for an EU label based on a single set of rules, which will enable them to offer their services across the EU (the ‘Agreed Rules’). If and when the Regulation is adopted, there will be a twelve-month transitional period, after which platforms will have six months in which to comply with it.

Key Objectives

The Commission’s aim is to set a consistent framework, which will facilitate a cross-border market while providing the necessary investor protection. It lays down uniform requirements for the operation, organization, authorization, and supervision of crowdfunding service providers (“CSPs”), as well as for transparency and marketing communications in relation to the provision of crowdfunding services in the Union.

What Crowdfunding Services will be covered?

The Regulation will apply to those that provide crowdfunding services in the form of matching the business funding interest of investors and “project owners” (meaning those seeking funding) through the use of a crowdfunding platform (defined as a publicly accessible internet-based information system), which consist of facilitating the granting of loans and/or placing of transferable securities and other permitted financial instruments (“investments”) issued by project owners.


Loans included in the scope of the proposal are loans with unconditional obligations to repay the amount owed to the investor, whereby lending-based P2P platforms merely facilitate investors and project owners to conclude loan agreements without acting as a creditor of the project owner.

Investment-based Crowdfunding

In relation to investment-based crowdfunding, transferability is an important safeguard for investors to be able to exit their investment since it provides a legal possibility to dispose of their interest in the capital markets. The proposal, therefore, covers crowdfunding services related to transferable securities as the concept is widely understood, but also recogni​z​es the position of private limited companies. Shares of certain private limited liability companies are allowed, so long as they are not subject to restrictions that would effectively prevent them from being transferred, including restrictions on the way in which they are offered to the public.

Initial Coin Offerings (“ICOs”)

While the Commission recognized that ICOs can help to fund SMEs, they are excluded from the proposal as their characteristics are considerably different from the services the Regulation is intended to cover.

What is the Threshold for CSPs?

The EU Crowdfunding Regime will not apply to crowdfunding platforms that offer funding with a consideration of more than €5 million, which shall be calculated over a 12 month period.

Further, donation-based crowdfunding platforms, reward-based crowdfunding platforms and crowdfunding platforms which facilitate initial coin offerings are outside the scope of the EU Crowdfunding Regime. Whether these platforms are subject to authorization and regulation in the EU will be determined by each EU member state.  

Existing Qualifying Platforms which are authorized under MiFID II (Directive 2014/65/EU), the PSD, the Electronic Money Directive (Directive 2009/110/EU) or the Capital Requirements Directive (Directive 2013/36/EU), should be able to benefit from a simplified authorization procedure to become CSPs as competent authorities should not require the submission of information already at their disposal.

What is your opinion on this subject?

I would like to learn your opinion on this EU initiate and how do you see the objectives described above reflecting into more trust from investors in P2P platforms. Remember that this will be still a long process and it is critical that investors mobilize towards ensuring their view point is considered.

Part 2 of this series will focus on the conditions for authorization as a CSP as well as discuss the operations requirements for a P2P platform to operate across Europe.

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