Regulation and the Future of the Equity Crowdfunding Industry
Rōnin Team on august 29th, 2022 / Rōnin insights / 3 min read
The major world economies are doing very well in the crowdfunding markets. In the EU, things have enough space for growth… and that makes us super excited! On November 10, 2020, the Regulation on European crowdfunding service providers (ECSP) for businesses came into force. After a 12-month transition period, the rules came into force on 10 November 2021, applying directly across the EU. The regulation establishes uniform rules across the EU for the provision of investment-based crowdfunding and lending services related to business financing. The expectation is that these rules will bring improvements, thus helping companies that are looking for financing alternatives.
Let’s take a look at the European landscape when it comes to Equity Crowdfunding.
The value of transactions for equity crowdfunding platforms in Europe (excluding the UK) increased significantly between 2013 and 2020. In 2020, equity crowdfunding reached a total value of US$280 million.
What the European Equity Crowdfunding Providers Regulation says
This new European legislation is based on the desire to create a more accessible market with a single EU regime, arriving at the elimination of divergent national rules regarding crowdfunding service providers within the European Union.
The European Regulation provides a transition period to allow crowdfunding service providers to adapt to the new requirements and apply for a license. The transition period started on November 10th, 2021, and will last until November 10th, 2022, but the European Commission can extend the transition period once by 12 months. This means that, for the time being, crowdfunding service providers can continue to provide crowdfunding services under the previously applicable national regulations.
We, Rōnin, have submitted the application and are waiting to obtain the license.
It is assumed that the transition period until November 10th, 2022 should be sufficient for the national authorities to process the applications and grant the licenses. The main obstacle at the moment, however, is that the delegated acts of the EU still exist only as draft regulatory technical standards of ESMA and have not yet been officially adopted by the European Commission.
How Romania aligns with the European Equity Crowdfunding Regulation
In June, this year, the Romanian Chamber of Deputies voted on the Law on the establishment of measures to implement Regulation (EU) 2020/1503 of the European Parliament and of the Council on October 7th, 2020, on European providers of crowdfunding services for businesses and amendment of Regulation (EU) 2017/1129 and Directive (EU) 2019/1937. The law regulates the creation and management of crowdfunding platforms, which can be used to finance businesses and investments.
This law opens many opportunities when it comes to crowdfunding campaigns as an innovative formula for attracting investments. The law promotes cross-border crowdfunding services, in order to facilitate the access of crowdfunding platforms to the entire internal market of the European Union, through a single authorization based on a single set of rules.
This initiative provides support across the legal framework for the startup ecosystem to grow and empowers all the stakeholders to continuously contribute to a better space for the startups to bring innovation to serve the many. We salute this initiative and support the startup environment to develop and create a bridge between the entrepreneurs and supporters to enhance the investment space and make it accessible to everyone who needs to put his money to grow.
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