The European Union (EU) is changing the field of business crowdfunding thanks to the implementation of the European Crowdfunding Service Providers Regulation (ECSPR).
European Regulation for Crowdfunding Service Providers (ECSPR)
This unified regulatory framework establishes a level playing field for all platforms and transforms financing opportunities for entrepreneurs and small businesses.
Until recently, a lack of consistency in regulatory requirements at the national level prevented the expansion of crowdfunding platforms beyond national borders. The diversity of regulations in different countries complicated cross-border initiatives, limiting the fluidity and effectiveness of crowdfunding in the region.
With the ECSPR initiative, which began in 2020 and has been in force since last year, it eliminates the need for country-by-country approvals.
Although platforms must still register through national bodies for regulatory oversight, approval under the ECSPR grants them the ability to operate across the EU.
Case of success
Companies such as San Francisco-based Wefunder and the UK’s Crowdcube have demonstrated the effectiveness of the new regulatory framework by successfully expanding in the EU after obtaining authorization under the ECSPR.
For Matt Cooper, co-CEO of Crowdcube, these changes represent an opportunity for founders looking for funding.
Limitations
Private EU companies can raise up to €5 million from retail investors in a single offering, with the possibility of increasing to €13 million for platforms licensed in both the UK and EU. An exemption is established for professional investors.