European Crowdfunding Service Providers are now able to provide crowdfunding services on a cross-border basis throughout the EU without needing to obtain separate authorisation in each Member State. This development is part of the EU’s Capital Markets Union economic policy initiative.
The Regulation on Crowdfunding lays down uniform rules across the EU for the provision of investment-based and lending-based crowdfunding services related to business financing. Said platforms will need to be authorised by the national competent authority (NCA) in the EU Member State in which they are established. In line with this, the Malta Financial Services Authority has introduced a new application to start the authorisation process for crowdfunding service providers.
Start-ups, small and medium enterprises, and innovative companies often have difficulty accessing funds via traditional means such as bank loans, or through the capital markets, which can be both time-consuming as well as costly. Crowdfunding service providers enable them to connect to and raise funds from multiple investors, usually via digital platforms.
“In many respects, this is a very welcome development for the sector, bringing about much-needed clarity. This new legislation benefits the businesses that need to raise funds, the investors, through appropriate safeguards for consumer protection and ultimately stimulates the wider economy. It also facilitates the cross-border provision of crowdfunding services in the EU, which has been one of the biggest hurdles faced by crowdfunding platforms, leading to high compliance and operational costs. We believe that Malta is well placed to host such platforms, being a jurisdiction which is predominantly composed of SMEs and inclined towards FinTech driven entities,” says Doreen Balzan, MFSA’s Head of Securities and Markets Supervision.
The new Crowdfunding Regulation only applies to investment-based and lending-based crowdfunding services. Other types of crowdfunding, such as reward and donation-based crowdfunding, do not fall within the scope of this legislation.
For more information or advice contact the Malta Business Agency team.