29th August 2018

Crowdfunding has the potential to become a much greater source of funding for small businesses in Europe, Conservative MEP Ashley Fox said today as he unveiled proposals for EU-wide regulation of the sector.

Separate national rules currently limit cross-border activity, but Mr Fox's report would introduce common regulations and standards that crowdfunding service providers (CSPs) could opt into.

He said: "A European passport for CSPs is important and much needed. It offers the potential to scale up crowdfunding activity across Europe, opening up early stage finance for many more enterprises without disturbing well-functioning domestic market rules.

"It would also offer protections for both investors and those seeking to raise funding."

Different levels of regulation would apply to platforms depending on the complexity of their operations. Mr Fox proposes a threshold of €8 million on crowdfunding offers and recommends that member state authorities oversee the new pan-EU system alongside their own national rules.

The passport would also be available to platforms dealing in initial coin offerings – a type of crowdfunding which often involves cryptocurrencies and is focused on Distributed Ledger Technology-based solutions. This market is currently unregulated and open to abuse, and Mr Fox described his proposal as taking "an initial step towards imposing standards and protections for an industry that is an excellent funding stream for tech start-ups."

Finally, the report proposed that CSPs in countries outside the EU should be able to apply for a passport, provided their national regulators are willing to apply the EU regulations in full.

Mr Fox told the European Parliament's Economic and Monetary Affairs Committee: "I see this regime as a fantastic opportunity to export best practice. Expansion beyond the single market will not only provide greater investment to European projects but also ensure that European investors are getting the same protections when investing in third countries."

It is hoped the report will be considered by the full parliament before the end of the year.

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