European Business Organization Law Review

, Volume 19, Issue 2, pp 217–251 | Cite as

Cross-Border Crowdfunding: Towards a Single Crowdlending and Crowdinvesting Market for Europe

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Abstract

Crowdlending and crowdinvesting have experienced rapid growth in some EU Member States. However, these types of crowdfunding have, for the most part, remained a phenomenon of those larger Member States that ‘draw a crowd’, with populations that are large enough to make crowdfunding systems economically feasible. In turn, crowdfunding has remained a mainly national issue, prompting the European Commission to conclude that there is no need for harmonization of crowdfunding rules in Europe. In contrast to the European Commission’s Capital Market Action Plan, this paper takes the view that national limitations on crowdinvesting and crowdlending de facto are the result of limits de iure. Given that no European passport is tailor made or fits crowdfunding, this source of financing is doomed to remain national. Moreover, with different legal requirements in Member States, European law hinders the development of cross-border crowdfunding within the region. This is particularly true for smaller Member States whose populations are too small to constitute ‘a crowd’. This paper details how European regulators could facilitate a Single European Crowdfunding Market. Regulation of the crowdfunding platform based on the ‘MiFID light’ framework could function as the basis for a cross-border crowdfunding manager passport, given the minimum protection it affords both investors and the financial system, and the low costs it imposes on the platform. Following the (1) too-small-to-care, (2) too-large-to-ignore, and (3) too-big-to-fail development path of FinTech business models, we suggest adding a relevance threshold of EUR250,000 in transaction volume to the MiFID light framework and imposing regulation to address systemic risk stemming from very large crowdfunding platforms.

Keywords

Financial regulation Crowdfunding FinTech Crowdlending Equity based crowdfunding Crowdinvesting Capital Requirements Directives (CRD IV) Capital Requirements Regulation (CRR) Market in Financial Instruments Directive (MiFID) Markets in Financial Instruments Regulation (MiFIR) Directive on Undertakings for Collective Investment in Transferable Securities (UCITSD) Directive on Alternative Investment Fund Managers (AIFMD) 

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Copyright information

© T.M.C. Asser Press 2018

Authors and Affiliations

  1. 1.Professor of Law, ADA Chair in Financial Law (Inclusive Finance), Faculty of Law, Economics and FinanceUniversity of LuxembourgLuxembourgLuxembourg
  2. 2.Director, Center for Business and Corporate LawHeinrich-Heine-UniversityDuesseldorfGermany
  3. 3.Ph.D. CandidateUniversity of ZurichZurichSwitzerland
  4. 4.Trainee-in-lawGasser PartnerVaduzLiechtenstein

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