EU Member States Conclude Negotiations on European Crowdfunding Service Provider Regime: Harmonized Regime instead of Opt-In, Major Boost for Lending Platforms

The European Council has concluded its negotiations on the European Crowdfunding Service Provider Regime, after discussing for more than a year how to facilitate more cross-border Crowdfunding, especially for equity-based and lending-based Crowdfunding.

The European Council “defines the EU’s overall political direction and priorities.”

The Council is not one of the EU’s legislating institutions, as an entity it sets the EU’s policy agenda, by adopting conclusions during Council meetings which identify issues of concern and actions to take.

Departing from the proposal of both the European Parliament and the European Commission (EC), the Council agreed to create a Harmonized Regime across Europe instead of an Opt-In Regime.

Platforms which intermediate the emission of transferable securities or loans fall under the scope of the new regime and have to obtain a license from the national supervisor agency to operate cross-border.

The original intention of the regulation of creating an easy way to provide Crowdfunding services in Europe is still in place, since according to the Council, platforms only have to register in one country in order to actively offer their Crowdfunding services in other countries.

However, the details are important.

The European Commission proposal put the threshold for a prospectus-free emission at 1 Million Euro, the European Parliament raised the threshold to 8 Million Euro per year, the Council now gives member states the possibility to put the threshold somewhere between 1 Million Euro and 8 Million Euros.

Last minute changes to the Council proposal makes it necessary for the platforms to check the threshold in each country before actively addressing investors in each country.

The Council proposal does not create a fully harmonized regulation because member states can create very different regulatory requirements for prospectus-free emissions.

The EP proposal and the EC proposal does not include individual investor thresholds.

The Council has come up with a very unique proposal to address this issue. After debating a harmonized maximum investor threshold for a Prospectus-Free emission, the Council agreed to establish a minimum-maximum threshold for individual investors. The proposal allows member states to set an individual threshold starting at 1000 Euros per investor per project. The crowdfunding service providers have to check which individual threshold applies in each state.

For lending-based Crowdfunding platforms, the new regulation will certainly be a boost. In most countries, providing the service of lending-based Crowdfunding to SMEs requires some sort of banking license, resulting in most platforms partnering with a fronting bank.

According to the Council proposal, this requirement is not necessary anymore – platforms can now intermediate loans between private investors and SMEs across Europe.

It is to be expected that the large market shares of lending-based Crowdfunding continue to grow in the future under the new regime.

However, the next phase of the European Crowdfunding Service Provider Regime is the Trialog between the Council, Parliament, and the Commission.

The industry expects this debate to conclude by the end of the year, thus allowing the new regime to come alive in January 2020, with a twelve months transition period, which can be extended for another twelve months for platforms operating in one member state only.

Karsten Wenzlaff is Project Leader at the Interreg Central Europe Project CrowdfundPort ( and CEO of ikosom. He researches on Crowdfunding Regulation at the University of Hamburg and serves as the Secretary-General of the German Crowdfunding Association.

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