The European Crowdfunding Service Providers Regulation
ECSPR was adopted by the European Parliament and Council in 2020, and is currently being implemented across the EU. It allows licensed P2P and crowdfunding platforms to operate in all of the 27 European member states and to carry out cross-border transactions. Existing crowdfunding platforms with prior authorisation under national rules have to receive authorisation under the new European regulatory framework by 10 November 2023.
The ECSPR covers crowdfunding campaigns that raise up to €5 million, which covers most crowdfunding campaigns in Europe. Crowdfunding platforms that are licensed in the EU and UK may also be used by businesses to raise up to €13 million in total across the EU and UK – €8 million from UK-based everyday investors, plus €5 million from EU-based everyday investors.
It also creates a new legal status called the "European Crowdfunding Service Provider" (ECSP), which is a type of financial intermediary that is subject to specific regulatory requirements. The aim is to promote crowdfunding as a source of funding for small and medium-sized enterprises (SMEs) and startups, while ensuring that investors are adequately protected. The requirements for ECSPs include transparency, investor protection, and risk management, plus obligations to provide investors with clear information about the risks associated with investing, the need to establish procedures for resolving disputes, and to maintain adequate capital reserves.
The regulation also provides for a European passport system, which allows ECSPs to operate across the EU without needing to obtain separate authorizations in each individual Member State. By establishing a harmonized regulatory framework for CSPs operating in the EU, the regulation is expected to boost cross-border crowdfunding and promote innovation in the sector.
UK-based Crowdcube became the first EU licence holder via its Spanish subsidiary Crowdcube Europe. Since obtaining the licence, the company has already expanded into France, the Netherlands, Belgium and Scandinavia, and it has funded more than 20 deals.
Fazil was described inFF News | Fintech Financeas “theSpanish Revolut.“ Revolut was valued at $33 billion in its most recent funding round, led by SoftBank and Tiger Global. This is not a recommendation, though let's remember that the earliest crowdfunding investors in Revolut exited with a 19X ROI.
The first cohort of platforms to receive ECSPR approval alongside Crowdcube Europe also included Lendahand, CrowdedHero and Villyz. There are now twenty three in total. The latest platforms to gain permissions are Evenfi Fintech and Urbanite Real Estate Platform, both based in Spain; Bolero Crowdfunding, Belgium; Sweden’s SaveLend; and Soul Invest, France. Here is the full list of the23 licensed platforms, provided byCrowdSpace.
Here is other news and media content that caught my attention in crowdfunding, crypto, fintech, blockchain and ESG investing.
Malaysia's financial regulator, Securities Commission Malaysia, confirmed in its 2022 Annual Report that money raised through P2P and equity crowdfunding platformsgrew 26%from 2021 to '22. In total, these forms of alternative investment have helped over 7,200 micro, small and medium size businesses in Malaysia.
Innovate Financereported that Manchester-based fintechFROSTis usingequity crowdfundingwith a £1.75 million target. By April 2 it was 92% of the way with 24 days remaining. The e-money account provider leverages data access through intelligent banking to help users reduce household bills and reduce their carbon footprint. It has also gained its own carbon neutral certification throughClimate Impact Partners. Frost is walking the walk as well as talking the talk!
Congratulations to London-based womenswear brandThe Fold Londonfor raising over £1.6m in recent equity crowdfunding. Media platformBusiness of Fashionfollowed it up with a pros and cons guide to this means of raising bothalternative investmentand profile in a very brand-conscious sector.
Many people were skeptical when El Salvador made Bitcoin legal tender, said an item inInvesting.com. Starting on November 18, 2022, the country’s national treasury bought one a day. With Bitcoin's rising value, their bet looks to be paying off, enabling successful repayment in January this year of one of two outstanding $800 million bonds. “The government still owes $367 million plus interest on an additional bond set to mature in January 2025, but the successful repayment of the 2023 bond is apositive signfor the country's financial stability.”
A recent article inThe Impact Investorshortlisted nine top crowdfunding platforms for backers to supportsolar power-related projects taking place around the world. This can be through making donations, ordering products, contributing to P2P loans, or taking equity in startups. It also gives some tips on how to run successful crowdfunding. Top of the list is “give yourself enough lead time.” Many people underestimate the time it takes to prepare thoroughly.
Since that solar power-themed article first appeared, SunCash is a new initiative developed to provide South Africans with a cost-effective solution to earn money and help solve the national energy shortage. Households are invited to install solar panels and sell the energy they create to the national grid, making them “prosumers.” South African investors are able to contribute to installation costs throughcrowdfunding, and earn a share of future profits with the process managed through blockchain-based smart contracts.
Please feel free to share Startup Investments Insider with your contacts and networks, and be sure to Subscribe to be informed at the moment it is published each week.
You can also join a waitlist, under no obligation, to stay up-to-date with our own news as the CrowdInvest equity crowdfunding platform approaches the start of trading. It is a cross-border platform offering UK-based sophisticated investors opportunities to invest in impact-driven, high-growth tech startups operating in emerging economies. To begin we will focus on the UK-India corridor, and later expand to include startups in southeast Asia, the Middle East, and Africa. We will start trading in Q2 2023, and host a series of events before then. Sign up today.
To help you understand the risks involved when investing in unlisted businesses, by either subscribing to shares, bonds or other equity instruments please read the following risk summary. Please be aware, before investing and diversifying your investments, you are strongly advised to seek independent financial, legal and tax advice. CrowdInvest does not provide investment advice or recommendations; you are responsible for your decision to make an investment in any opportunity presented to you on the CrowInvest platform. Only an independent financial, legal or tax advisor employed by you will be able to advise you on whether the opportunities presented on the CrowdInvest platform are suitable for your needs in view of your personal circumstances.
Diversification to help manage Risk
Diversification involves spreading your money across different types of investments with different risks to reduce your overall risk. However, it will not lessen all types of risk. Diversification is an essential part of investing. Investors should only invest a proportion of their available investment funds via CrowdInvest and should balance this with safer, more liquid investments. Only an independent financial advisor can advise you on diversification, this information is being provided to you as a guide only and should not be taken as investment advice.
Investing in shares (also known as equity) does not involve a regular return on your
investment, unlike other instruments (bonds) which may offer interest paid regularly.
Investing in equity can be rewarding when the instruments perform well, however, you
should be aware that you could lose some, part or all of your original capital invested.
Investing in early-stage businesses is high risk as not all will succeed, some may fail and
some may not meet performance expectations at all, or in the time frame envisaged.