As part of its efforts to improve access by investors and businesses to new financing sources, the EU is setting out a new regulatory framework for the operation of crowdfunding platforms.

This new framework makes it easier for crowdfunding platforms to provide their services across the EU. It harmonises the minimum requirements on these platforms when operating in their home market and other EU countries. The proposal also increases legal certainty by harmonising investor protection rules.

The expansion of digital tools is driving financial innovation and the development of new, easy alternatives for start-ups looking for accessible funding sources. As regulators, we need to encourage this expansion while guaranteeing a safe environment for consumers and investors. Eugen Teodorovici, minister of finance of Romania

Crowdfunding is an emerging alternative form of financing that connects, typically via the Internet, those who can give, lend or invest money directly with those who need financing for a specific project. For start-ups and other SMEs, bank lending is often expensive or difficult to access due to the lack of credit history or a lack of tangible collateral. Crowdfunding can be a useful substitute funding source, in particular in the early stages of business.

The Council position:

removes barriers for crowdfunding platforms operating cross-border;

provides tailored rules for EU crowdfunding businesses depending on whether they provide their funding in the form of a loan or an investment (through shares and bonds issued by the company that raises funds);

provides a common set of prudential, information and transparency requirements to ensure a high level of investor protection;

defines common authorisation and supervision rules for national competent authorities.

According to the Council's position, the proposal covers crowdfunding campaigns of up to EUR 8 million over a 12 month period as a general rule. Where member states have decided to set the threshold for prospectus obligations below EUR 8 000 000, they should be able to prohibit the raising of capital for crowdfunding projects from its residents for amounts exceeding that national threshold. Larger operations are regulated by MiFID and the prospectus regulation. Reward- and donation-based crowdfunding fall outside the scope of the proposal since they cannot be regarded as financial services.

Next steps:

The European Parliament adopted its first reading position on 27 March 2019. Both co-legislators are now in a position to start trilogue negotiations.