European crowdfunding service providers for business

29-05-2018

This briefing provides an initial analysis of the strengths and weaknesses of the European Commission's impact assessment (IA) accompanying the above-mentioned proposal, published on 8 March 2018 and referred to Parliament's Committee on Economic and Monetary Affairs (ECON). The strengthening of the capital markets to boost long-term investment in the EU is a priority EU goal. In this context, the Commission's 2017 mid-term review of the capital markets union (CMU) action plan noted that access to finance for small, innovative businesses is a challenge in all EU countries, even those where access to bank finance has remained stable during the financial crisis. Start-ups and other unlisted firms lack risk finance to invest in innovation and growth, in particular in the early stages of their development (IA, p. 6, 8). In view of closing this gap and complementing bank financing, the Commission supports alternative sources of financing, including technology-enabled financial services, the largest part of which consists in crowdfunding. In this context, crowdfunding is defined as an 'open call for the collecting of resources ... from the wider public through an internet-based platform for a specific project' (IA, p. 8). A 2016 Commission staff working document noted that crowdfunding has been developing rapidly since 2013, but remained concentrated in a few EU countries, with 81 % market share in the United Kingdom (UK) (IA, p. 16). Some Member States introduced national rules to regulate their online platforms and/or apply elements of existing EU legislation on financial services to specific types of crowdfunding, while others leave some aspects of the activity unregulated. This regulatory patchwork hinders cross-border crowdfunding and creates considerable market fragmentation (IA, pp. 26-30).

This briefing provides an initial analysis of the strengths and weaknesses of the European Commission's impact assessment (IA) accompanying the above-mentioned proposal, published on 8 March 2018 and referred to Parliament's Committee on Economic and Monetary Affairs (ECON). The strengthening of the capital markets to boost long-term investment in the EU is a priority EU goal. In this context, the Commission's 2017 mid-term review of the capital markets union (CMU) action plan noted that access to finance for small, innovative businesses is a challenge in all EU countries, even those where access to bank finance has remained stable during the financial crisis. Start-ups and other unlisted firms lack risk finance to invest in innovation and growth, in particular in the early stages of their development (IA, p. 6, 8). In view of closing this gap and complementing bank financing, the Commission supports alternative sources of financing, including technology-enabled financial services, the largest part of which consists in crowdfunding. In this context, crowdfunding is defined as an 'open call for the collecting of resources ... from the wider public through an internet-based platform for a specific project' (IA, p. 8). A 2016 Commission staff working document noted that crowdfunding has been developing rapidly since 2013, but remained concentrated in a few EU countries, with 81 % market share in the United Kingdom (UK) (IA, p. 16). Some Member States introduced national rules to regulate their online platforms and/or apply elements of existing EU legislation on financial services to specific types of crowdfunding, while others leave some aspects of the activity unregulated. This regulatory patchwork hinders cross-border crowdfunding and creates considerable market fragmentation (IA, pp. 26-30).