EU develops uniform rules to boost crowdfunding

Last month, the European Parliament (EP) and the European Council reached a deal on EU-wide rules for crowdfunding services in the European Union. Both, EP and Council aim at defining a uniform set of criteria for European Crowdfunding Service Providers (ECSP). In doing so, the criteria should help crowdfunding services function smoothly and foster cross-border business funding. According to the current proposal, the rules will apply to all ECSPs that offer up to EUR 5,000,000 over a period of 12 months per project owner.

Strengthening transpareny and capacities

The legislation stipulates that project owners provide key investment information sheets (KIIS) to investors. Crowdfunding service providers need to ensure transparency about financial risks, charges that may incur, and project selection criteria. In addition, investors with less or no experience will have the possibility to get guidance and in-depth advice.

With regards to the legislative proposal, ECSPs need the authorisation from a national competent authority (NCA) of the member state in which they are established. The authorisation follows a notification procedure in a member state. Likewise, the NCA and the European Securities and Markets Authority (ESMA) carries out the supervision of the crowdfunding service provider. The role of ESMA is to facilitate and coordinate the cooperation between member states.

Facilitating crowdfunding in the European Union…and beyond

Currently, the services of the European Parliament, the European Council, and the European commission assess the legislative text. After that, the Economic Affairs Committee and the European Parliament as a whole have to approve the agreement.

In the European discourse, funding instruments such as crowdfunding appear to be promising alternatives to classic investments and project funding. Against this background, European institutions increasingly acknowledge crowdfunding as viable form to finance start-ups as well as small and medium enterprises (SMEs) at an early stage of the business. With the proposed legislation, the European institutions seek to contribute to a transparent and striving environment for small-scale investors and businesses.

However, the need to establish a sustainable environment for crowdfunding goes beyond EU borders and requires more than sound legislation. This is why, the project CrowdStream developed a framework to boost crowdfunding initiatives in the Danube Region. Project partners from Austria, the Czech Republic, Hungary, Croatia, Bulgaria, Slovenia, Slovakia, Montenegro, Serbia, Belgium, France, and Finland worked together on quality criteria for crowdfunding platforms, raising awareness, trainings and capacity building, and many more initiatives.

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