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.

Europe-wide crowdfunding campaigns on Crowdcube include a current one for the Dugga Digital Assessment edtech startup in Sweden, and one coming soon that is asking potential investors to register interest in fazil neobank in Spain.

Fazil was described in FF News | Fintech Finance as “the Spanish 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 the 23 licensed platforms, provided by CrowdSpace.

Here is other news and media content that caught my attention in crowdfunding, crypto, fintech, blockchain and ESG investing. 

Crowdfunding

Malaysia's financial regulator, Securities Commission Malaysia, confirmed in its 2022 Annual Report that money raised through P2P and equity crowdfunding platforms grew 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 Finance reported that Manchester-based fintech FROST is using equity crowdfunding with 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 through Climate Impact Partners. Frost is walking the walk as well as talking the talk!

Congratulations to London-based womenswear brand The Fold London for raising over £1.6m in recent equity crowdfunding. Media platform Business of Fashion followed it up with a pros and cons guide to this means of raising both alternative investment and profile in a very brand-conscious sector.

Cross-border

Singapore-based cross-border payments firm Thunes has raised $30 million in an ongoing investment round, reported Finextra.

Crypto

Many people were skeptical when El Salvador made Bitcoin legal tender, said an item in Investing.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 a positive sign for the country's financial stability.”

ESG Investing

A recent article in The Impact Investor shortlisted nine top crowdfunding platforms for backers to support solar 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 through crowdfunding, and earn a share of future profits with the process managed through blockchain-based smart contracts.

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