Crowdfunding is an innovative funding opportunity that allows entrepreneurs to make an 'open call' to the wider public for the collection of financial support for a specific business project. This is generally done through an internet-based platform, which matches the supply and demand of the funds.

Crowdfunding provides a much-needed alternative to bank lending, which is currently the main source of external finance for small and medium enterprises (SMEs). The type of bank lending currently available for entrepreneurs, start-ups and small enterprises is often expensive or difficult to access due to the lack of credit history or a lack of tangible collateral. 

While crowdfunding platforms are gaining importance as an alternative to bank financing on a national level, diverging legislation across the EU (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) makes operating across-borders cumbersome.

The Commission's proposed Regulation introduces an optional EU regime which enables crowdfunding platforms to easily provide their services across the EU Single Market. Instead of having to comply with different regulatory regimes, platforms will have to comply with only one set of rules, both when operating in their home market and in other EU Member States. This is expected to widen the pool of investors and the number of projects to pick from, as well as provide legal certainty as regards the applicable investor protection rules.

The accompanying Directive amends the scope of Directive 2014/65/EU (MIFID II) by adding crowdfunding service providers authorised under the proposed Regulation to the list of exempted entities to which the scope of the Directive does not apply.

This wagon follows the Directive. The Regulation is dealt with in wagon 'Crowdfunding Service Providers'.

The European Parliament's Committee on Economic and Monetary Affairs (ECON) appointed Caroline Nagtegaal (ALDE, The Netherlands) as rapporteur for this file. On 26 July, the rapporteur published her draft report. On 12 September, amendments to the draft report were tabled in Committee. On 5 November, the report was adopted in committee and on 9 November it was tabled for plenary. Parliament voted on the file on 27 March 2019 to conclude in first reading and preserve its position for its next term. The file is therefore part of unfinished business to be carried over.

On 11 July, the European Economic and Social Committee adopted in plenary its opinion on the Commission proposal and on 3 August it published it.

In the Council, the Working Party on Financial Services discussed the proposal at eight meetings during the Bulgarian, Austrian and Romanian Presidencies. The Council adopted its negotiating stance on 24 June 2019. On 23 September, the ECON Committee of the European Parliament took the decision to open interinstitutional negotiations.

On 13 March 2020 a final compromise with view to an agreement was published in the Council's register. In May 2020, the text agreed at early 2nd reading interinstitutional negotiations was approved in committee. On 20 July 2020, it was adopted by the Council. The final act was published in the Official Journal of the EU on 20 October 2020.

References:

• EP Legislative Observatory, Procedural file on Markets in financial instruments: crowdfunding service providers, 2018/0047(COD)
• European Commission, Proposal for a Directive amending Directive 2014/65/EU (MiFID2), COM(2018)0099
• European Economic and Social Committee, Opinion on the Commission Proposals (COM(2018) 99 final and COM(2018) 113 final)

Author: Angelos Delivorias, Members' Research Service, legislative-train@europarl.europa.eu