Members of the European Crowdfunding Network have written an open letter to the member states of the European Council in support of a pan-EU regime for crowdfunding platforms.
This has come as backing to the proposed action plan on an EU-wide crowdfunding regulation which was pitched by the European Commission earlier this year. These changes were proposed to improve financing for SMEs, which are currently undeserved by banks.
The original action plan from the European Commission called for support with utilising new technologies like AI, help with growth across Europe, and a system which enables a platform licensed in one country to operate across the EU.
Having an infrastructure like this in place will foster a level playing field and help European crowdfunding companies expand across the single market, the European Crowdfunding Network said.
Other benefits include making the EU market more available to entrepreneurs, startups and SMEs, providing wider choice for EU investors, and promote non-bank financing as a key alternative funding.
In the letter it states, “To date, significant differences in Member State legislation have made crowdfunding a largely national issue. This has meant that the vast potential for cross-border capital flows has not been tapped, leading to substantially less funding and fewer investment opportunities across the EU than would be available under a unified regime.”
Crowdfunding platforms are pivotal to many businesses trying to scale, and the European Crowdfunding Network believes this regime would create a ‘robust and thriving sector’ for investors and SMEs.
The group highlights that license requirements imposed by some Member States on project owners and investors are causing a lot of challenges in the industry. Some laws require borrowers to obtain licenses for deposit-taking and lenders need a license for provisions of credit. If this continues, the application of the proposed regulations would not work.
The letter continued, “For the Regulation to reach its aims, it is crucial that European crowdfunding players are not faced with the burdens and related costs of identifying and complying with 28 different regimes across the EU. Many of these companies are relatively small businesses for whom the costs of compliance and related infrastructure would make it exceedingly difficult for them to operate on a cross-border basis. Today, only very few crowdfunding platforms operate in more than one EU Member State due to significant compliance and operational hurdles.”
European Crowdfunding Network is pitching for opt-in ‘29th regime’, to help smaller platforms avoid additional compliance and operational costs by focusing on existing licensing requirements. It will also help established platforms to grow internationally, with smoother transitions.
Due to the differences of legal frameworks across member states, the group knows a timely turnaround is not possible.
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