Crowdfunding and initial coin offering: road to uniform EU rules

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22.10.2018

Crowdfunding services in EU member states are currently either not regulated at all or governed by the national legislation of each member state. The Crowdfunding Services Bill drafted by the Latvian Ministry of Finance is currently stalled in anticipation of further proposals from EU institutions.
 
The inconsistent national rules of member states make it difficult for companies to expand their operations and offer services across the EU. Small companies and start-ups are unable to enjoy an excellent method of raising funds from potential EU investors.
 
To address this problem, on 8 March 2018 the European Parliament and the Council heard proposals for adopting a uniform legal framework for the EU operations of crowdfunding service providers. The proposals aim to eliminate the fragmentation of crowdfunding markets in member states by adopting uniform cross-border crowdfunding rules allowing crowdfunding platforms to offer their services across the EU.
 
Amendments proposed by the ECON committee
 
On 10 August 2018 the ECON committee issued a draft report that includes the following changes to the EU crowdfunding rules.
 
The initial coin offering (ICO)
 
The crowdfunding rules should cover ICOs and help them span the EU on the same terms and with a uniform EU passport. The ECON committee finds that adopting the legal framework is a good opportunity to strengthen the ICO process by formulating uniform standard rules to protect customers and users.
 
Raising the €1 million crowdfunding offer threshold to €8 million
 
According to the ECON committee, an increase to €8 million would be in line with the current rules, and the national legislation of some member states already sets a higher threshold.
 
Supervision by competent authorities
 
The ECON committee finds that the Securities and Markets Authority should not be the one to approve or supervise European crowdfunding service providers because the competent authorities of member states are better placed to carry out this task by using their market expertise.
 
Various complexity of crowdfunding platforms
 
Given the various degrees of complexity of crowdfunding platforms, the proposed rules should strike a balance between simple platforms, which promote combinations of matching investors and project owners, and advanced platforms that set an offer price and each has different disclosure requirements.
 
Non-EU crowdfunding service providers
 
Non-EU service providers should be allowed to offer their services across the EU as long as they are authorised in their own jurisdiction and measures are taken to ensure they comply with the same rules as EU providers.
 
Investment advisory services
 
Crowdfunding service providers should be allowed to provide investment advisory services related to the traded financial instruments of project owners without being required to take out a MiFID II licence.
 
The ECON committee should now take the next step and vote on the draft report before 5 November 2018. We will keep you informed of any progress.
 
Contacts
Janis Gavars
janis.gavars@pwc.com
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