Crowdfunding Services Regulation Comes Into Force

The Crowdfunding Services Regulation (EU 2020/1503) came into force this week, providing harmonised regulation of European Crowdfunding Service Providers (ECSPs).

The concept of crowdfunding provides an alternative form of finance for start-ups and SMEs, offering validation to business ideas, insights and information and also serving as a major marketing tool. It operates through three actors:

1. The Project owner that initially proposes the project be funded
2. The Investors who provide the funding
3. The Intermediating organisation via crowdfunding service providers joining the two actors through an online platform.

Although this is not a new concept, with some countries already having their own rules covering this notion, this regulation was essential. It allows for cross-border crowdfunding without conflicting laws which previously hindered the smooth operation of crowdfunding online platforms.