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Towards a harmonised European Crowdfunding & ICO Regime

Dr. Günther Dobrauz Partner and Leader Legal, PwC Switzerland 28 Sep 2018

On 8 March 2018, the European Parliament and Council released a proposal for the regulation of commercial European Crowdfunding Service Providers (ECSP).

Currently, crowdfunding is regulated by the national legislation of the European Union (EU) member states. Different national rules make it difficult for crowdfunding platforms to expand and offer their services across the EU. As a result, small businesses and start-up companies are often unable to raise funds from a large number of potential investors throughout the EU.

The proposed regulation aims to overcome the fragmentation into national crowdfunding markets through a single regulatory system for cross-border crowdfunding products, in order to allow crowdfunding platforms to offer their services across the EU.

 

Amendments proposed by ECON

On 10 August 2018, the European Parliament’s Economic and Monetary Affairs Committee (ECON) published its draft report on the ECSP regulation proposal. The revised draft contains, among others, the following substantial changes:

  • Initial Coin Offerings (ICOs): ICOs shall be included in the scope of crowdfunding projects covered by the regulation. This would, for the first time, allow ICOs to be carried out on an EU-wide basis under the same conditions and under a single EU passport. ECON believes that the regulation is a good opportunity to provide regulations for ICOs by imposing standard rules and protecting clients and users. 
  • Increase of the threshold for crowdfunding offers from EUR 1 to 8 million: According to ECON, an increase to EUR 8 million would comply with the current prospectus provisions. Moreover, some EU member states already have a national regime with higher thresholds.
  • NCA Supervision: ECON considers that the European Securities and Markets Authority (ESMA) is most likely not the right body to approve and supervise the ECSPs, and that national competent authorities (NCAs) are more qualified due to their market expertise.
  • Levels of complexity of crowdfunding platforms: As crowdfunding platforms vary in complexity, the proposed regulation should distinguish between simple platforms, which facilitate the matching of investors and project owners, and more advanced platforms, which determine the pricing and packing of offers, by requiring different disclosure requirements for each.
  • Third-country providers of crowdfunding services: Service providers from third countries should also be able to offer their services in the EU, provided that they are authorised in their own jurisdiction and that measures are taken to ensure that these service providers comply with the same rules as service providers from the EU.
  • Investment advisory services: Crowdfunding service providers shall be entitled to provide the service of investment advice with respect to tradable securities of project owners without the need to obtain a MiFID II-licence.
  • Granting loans: Regarding the facilitation of granting of loans, it shall be distinguished between a mere “matchmaking” service and additional services including determining the “packaging” and “pricing” of the crowdfunding offers. Information/disclosure obligations would differ depending on the activities provided.

 

Next steps

The next step is for ECON to vote on the draft report before the European Parliament committee considers it on 5 November 2018. We will keep you informed of the results. 

 

Contacts

Dr. Günther Dobrauz

Partner and Leader Legal, Zurich, PwC Switzerland

+41 58 792 14 97

Email

Dr. Jean-Claude Spillmann

Director, Head Asset & Wealth Management and Banking Regulatory, Legal, Zurich, PwC Switzerland

+41 58 792 43 94

Email

Mark A. Schrackmann

Manager, Legal, Zurich, PwC Switzerland

+41 58 792 2560

Email