EU Crowdfunding Regulation: crowdfunding the future?

The Regulation introduces a single European status for any legal persons seeking to provide crowdfunding services, the "European crowdfunding service providers" (“ECSP”), to be authorized by the national authority of its home Member State. An authorized ECSP may passport its services to project owners or investors located in other EU members states, without necessity to establish a physical presence thereto. In other words, investors from a certain European Member State will now have the opportunity to participate in cross-border financing projects of companies based in another Member State, through a crowdfunding platform based in a third Member State.

Investors, now classified as “sophisticated” or “non-sophisticated”, will gain access to an enlarged offer of crowdfunding services, ranging from lending-based or investment-based crowdfunding to individual portfolio management of loans.

New opportunities brought to the crowdfunding platforms by the Regulation do not come without a cost, as they will have to establish strong governance to comply with the new requirements set by the Regulation (publication of a Key Investment Information Sheet (“KIIS”) to be provided to the potential investors, due diligence requirements, conflict of interest policy, etc.).  

The Luxembourg bill of law no. 7825 (the “Bill”) amending the Luxembourg law to comply with the new regime set by the Regulation and appointing the Luxembourg financial sector supervisory authority, the Commission de Surveillance du SecteurFinancier (“CSSF”), as competent authority for the application of the Crowdfunding Regulation, has been lodged on 21 May 2021 and we anticipate that the Bill shall be approved in the upcoming months.

This Regulation may provide crowdfunding platforms with a well-needed push as they may now extend their offer of services throughout the EU while investors will benefit from enhanced transparency and protection measures. We trust the Luxembourg financial market is well-armed to implement this major transition for our market on a European scale.

You are looking to set up your crowdfunding activities in Luxembourg or review your processes in the light of the Regulation? You are a project owner seeking funding through crowdfunding and willing to discuss the opportunities brought by the Regulation? Get in touch with our Banking, Finance and Capital Markets Team.