Yesterday, Crowdfund Insider reported on the agreed-upon legislation for harmonized pan-European crowdfunding rules. Having a single market for online capital formation has been a goal of crowdfunding industry leaders and industry participants for years. Industry advocates have worked diligently behind the scenes to push forward synchronized regulations communicating frequently with European Commission and European Parliament. Perhaps most vocally, has been the European Crowdfunding Association (ECN) under the leadership of long-time Executive Director Oliver Gajda.
Under the new rules, an issuer will be able to raise up to €5 million (~USD $5.54 million) across the member states. Oversight of any offering will be managed by the member state regulator or “national competent authority” (NCA).
The updated rules will enable an issuer to sell securities to a market population of over 400 million individuals. Previously, an issuer had to navigate a highly fragmented regulatory regime. This regulatory friction obviously increased the cost while diminishing interest for issuers to pursue an offering across geographic boundaries. The agreed-upon changes are expected to fuel a more robust online capital formation market providing investors greater access to the asset class while helping to fuel entrepreneurship and innovation in the European Union – an important policy goal.
Following the announcement, CI reached out to Gajda for his feedback on the proposal. Gajda, having worked on this issue for many years, lauded the change to the European crowdfunding rules:
“ECN is welcoming the agreement reached between the co-legislators in Brussels on harmonising Crowdfunding in Europe. After many years of intensive work and exchange of knowledge, we are extremely excited to have an agreement on a workable framework, that will allow both small and large platforms to expand their services to European SME and citizens across borders,” said Gajda. “The path has been difficult at times, but we always met a knowledgeable and enthusiastic response from the European Commission and the European Parliament, but also the Council. We are also very glad that Member States have largely been able to forgo national interest in favour of a European market.”
While additional tweaks may be desired, Gajda does not want perfect to get in the way of new and improved:
“We are aware that the final agreement involves certain hurdles for the industry, but are positive that they can be dealt with. We also welcome the two year review period, which will allow assessing the impact of this legislation and enable an adapted and even more adequate laws afterward.”
Gajda also shared several comments from ECN members.
Jens Engelmann-Pilger from online lender Funding Circle had this to say:
“As one of the few SME loans platforms operating in several EU Member States, Funding Circle supports and welcomes the preliminary agreement reached by the European institutions on the European Crowdfunding Service Providers Regulation (ECSP). We believe that introducing a truly European alternative finance market will boost access to finance for SMEs by improving choice and competition in the market and reducing dependency on bank lending.”
Pascal Ouvrard, International Development Director of October, another leading SME lending platform operating in continental Europe, lauded the move by the EU:
“October welcomes the compromise on European Crowdfunding Services Provider (ECSP) which will provide an harmonized playing field in all European Member States for Crowdfunding platforms. This will boost the financing of European entrepreneurs to which October is proudly contributing to in 5 European countries. This achievement would not have been possible without a close cooperation of the European Commission, European Parliament and European Council with the ECN and industry.”
Fintech expert and CI Senior Contributing Editor Therese Torris joined other industry participants in welcoming the improved rules:
“One can only applaud the common European crowdfunding rules agreed upon by the European Parliament negotiating team and the Council. Only a few years ago such a harmonized framework was not in the cards. It is a testament to the work of the European Crowdfunding association, as well as of local crowdfunding associations such as Finance Participative France, and of crowdfunding platforms themselves that this step can be taken as the sector is still relatively young. It will benefit Fintechs, issuers and investors.”
The rules will impact both debt and equity platforms as well as issuers in the digital securities sector – an emerging element in online capital formation. This is a clear win for Europe. More to follow.