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Crowdfunding
European Union Electricity Market Glossary

 

 

Crowdfunding refers to the financing of a specific project or venture by raising money from a large number of people.

 

Interaction between fund raisers and the crowd (fund providers) is enabled by specific websites (crowdfunding platforms).

 

Fund providers are increasingly institutional (professional investors).

 

Recitals to the Draft Report of the Committee on Economic and Monetary Affairs of the European Parliament on the proposal for a directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments (COM(2018)0099 – C8-0102/2018 – 2018/0047(COD), Rapporteur: Caroline Nagtegaal, 2018/0047(COD) describe crowdfunding as “a fintech solution that provides alternative access to finance for start-ups and other unlisted firms, in order to unleash innovative entrepreneurship in the Union, thereby strengthening the Capital Markets Union. That in turn contributes to a more diversified financial system and one that is less reliant on banks. Another consequence of unleashing innovative entrepreneurship through crowdfunding is the unlocking of frozen capital, leading to investors being able to invest their capital cross-border”.

 

European alternative finance market, which mostly consists of crowdfunding, grew by 92% since 2014, to reach a value of €5.4 billion in 2015.

 

Respective figures of the total online alternative finance volume for the Asia-Pacific region (mostly China) are in the range of €94.6 billion and for the Americas (mostly the US) of €33.6 billion (Inception Impact Assessment, Legislative proposal for an EU framework on crowd and peer to peer finance (Ref. Ares(2017)5288649 - 30/10/2017)).

 

The two distinct forms of crowdfunding are differentiated:

 

- debt-based crowdfunding (consumer and business peer-to-peer finance on the basis of loans) accounts for the largest share of the market; and


- equity-based crowdfunding, where the investor receives a share in the company, is particularly significant for the funding of business start-ups (it helps fill the gap in the funding escalator when start-ups go from initial stage financing through friends and family to attracting interest from business angels and venture capital).

 

According to European Commission’s Frequently asked questions: Proposal for a Regulation on European Crowdfunding Services for Business crowdfunding is mainly conducted on the basis of national legislation, which means that platforms are subject to diverging rules depending on the country in which they operate. This makes it particularly difficult for platforms to provide their services cross-border. Several Member States have adopted bespoke regimes for investment-based and lending-based crowdfunding. A few other Member States do not specific rules but allow investment-based crowdfunding to be provided under Markets in Financial Instruments Directive (MiFID 2) rules.

 

The new rules as agreed by the Presidency and the European Parliament will cover crowdfunding campaigns of up to EUR 5 million over a 12 month period. Larger operations will be regulated by MiFID and the prospectus regulation. Reward- and donation-based crowdfunding fall outside the scope of the proposal (see the press release of the Council of the EU of 19 December 2019).

 

 

 

chronicle

Crowdfunding - regulatory chronicle

  

 

 

19 December 2019

 

Capital markets union: Presidency and Parliament reach preliminary agreement on rules for crowdfunding platforms

 

30 July 2018

 

Draft Report of the European Parliament, Committee on Economic and Monetary Affairs of 30 July 2018 on the proposal for a regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business (COM(2018)0113 – C8-0103/2018 – 2018/0048(COD)), 2018/0048(COD), Rapporteur Ashley Fox

 

Draft Report on the proposal for a directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments (COM(2018)0099 – C8-0102/2018 – 2018/0047(COD), European Parliament, Committee on Economic and Monetary Affairs (Rapporteur: Caroline Nagtegaal, 2018/0047(COD)

 

 

  

 

 

IMG 0744

    Documentation    



 

 

European Commission’s Frequently asked questions: Proposal for a Regulation on European Crowdfunding Services for Business 

 

Draft Report of the European Parliament, Committee on Economic and Monetary Affairs of 30 July 2018 on the proposal for a regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) for Business (COM(2018)0113 – C8-0103/2018 – 2018/0048(COD)), 2018/0048(COD), Rapporteur Ashley Fox

  

Draft Report on the proposal for a directive of the European Parliament and of the Council amending Directive 2014/65/EU on markets in financial instruments (COM(2018)0099 – C8-0102/2018 – 2018/0047(COD), European Parliament, Committee on Economic and Monetary Affairs (Rapporteur: Caroline Nagtegaal, 2018/0047(COD)

 

Inception Impact Assessment, Legislative proposal for an EU framework on crowd and peer to peer finance (Ref. Ares(2017)5288649 - 30/10/2017)

 

ESMA Opinion, Investment-based crowdfunding, 18 December 2014, ESMA/2014/1378

 

  

 

 

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    Links    

 

  

 

European Commission’s website on crowdfunding

 

 

 

 

 

Last Updated on Friday, 20 December 2019 09:20
 

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