A new law proposed by the EU could see crowdfunding platforms get wider access to customers in an effort to boost the fintech sector.
EU commissioner for financial services, Valdis Dombrovskis, said that making more allowances for crowdfunding within the EU bloc could boost the fintech sector.
The proposed law could help crowdfunding platforms scale up in Europe, according to a statement issued by Dombrovskis.
Nurturing fintech in Europe
The draft law is among a number of measures published today (8 March) by the European Commission (EC) to nurture growth and job creation, and wean the region off its heavy reliance on bank funding.
Dombrovskis added that the scheme will help crowdfunding firms “match investors and companies from all over the bloc, giving more opportunities for firms and entrepreneurs to pitch their ideas to a wider base of funders”.
Britain is a key fintech player and, as it is due to exit the EU next year, Brussels officials are keen to push the EU as an attractive choice for fintech companies.
At present, there are no EU-wide rules for crowdfunding, which means a myriad of national rules can make operating in more than one EU country an expensive undertaking.
The draft law proposes an optional pan-European regime, under which the European Securities and Markets Authority can give a crowdfunding platform a ‘passport’ operational licence for all member states.
“Instead of having to comply with different regulatory regimes, platforms will have to comply with only one set of rules, both when operating in their home market and in other EU member states,” the EC explained.
Dombrovskis said: “To compete globally, Europe’s innovators need access to capital, space to experiment and scale to grow. But we also need to address consumer safety and maintain the resilience of our financial institutions to cyberattacks.”
Crowdfunding campaigns of up to €1m over a 12-month period would be covered by the draft rules, but higher sums would be under the remit of the existing prospectus and securities regulations.
He added that the fintech action plan would also examine how financial supervisors can best keep up with new technological developments, and encouraged EU countries to set up safe spaces where companies can experiment with new technologies and business models. He also hinted at plans for a report on regulatory sandbox best practices.
Sustainable financial decisions
Dombrovskis introduced the passport concept as part of one of the EC’s financial plans geared towards fintech, the other concentrating on sustainable finance to help the EU hit its climate change targets.
The EU will need around €180bn a year in the next decade to meet its Paris Agreement climate commitments.
Plans within this strategy include EU labels for green financial products such as green bonds or investment funds, much like the organic labels on many food products; improving access and information for retail investors in terms of low-carbon investments; and changing the general culture in the financial industry to create a more sustainable sector.