EU executive to promote potential of crowdfunding

An EU quality label and possible State support for crowdfunding would help the €1bn sector grow to fund economic growth, the bloc’s executive body said.

Crowdfunding allows individuals and small firms to raise money from pools of investors who can put money into peer-to-peer lending schemes or into securities such as unlisted shares. It is often hosted on online platforms such as Crowdcube, Funding Circle, and Kickstarter.

The European Commission, in a draft document to be published next week, said crowdfunding has real potential to finance certain types of projects.

“Crowdfunding is an important source of finance to some half a million European projects each year that otherwise may not obtain the necessary funds to be realised,” the document said.

The document will be published alongside a blueprint setting out ways of boosting market-based fundraising at a time when small firms find it harder to get loans from banks that are focusing on increasing regulatory capital buffers.

“It’s great to see the EU recognise the positive impact that peer-to-peer lending has had across Europe,” James Meekings, co-founder of Funding Circle said.

The EU executive will conduct two studies this year; the first into how crowdfunding is used, the second into its potential for funding research and innovation, the file said.

The commission has just adopted new “risk finance” rules to govern state aid for small firms that find it hard to get loans in their early stages.

The file says these rules could also cover certain types of crowdfunding platforms.

The plans would involve the creation of a pan-EU forum to improve standards and best practices to protect contributors and to make sure complaints are handled properly.

Several EU states have already begun introducing rules for crowdfunding, but the document signals that Brussels is cautious about stepping in too soon with pan-EU regulation.

“The commission will continue to monitor the market and assess the need for regulatory action as a response to changing circumstances,” it said.

This week Britain’s finance ministry decided to allow the inclusion of crowdfunding in popular tax-free savings accounts.

— Reuters