ECN Open Letter On Legal Framework ECSP - 17dec2018

Brussels, 17 December 2018
Open letter to Member States on the European Crowdfunding Services Providers Regulation
(ECSPR)
The European Crowdfunding Network, on behalf of its members, fully supports the
European Commission’s objective of creating a pan-EU regime for crowdfunding
platforms which can significantly improve the financing situation of small and medium-
sized enterprises (“SMEs”). As explicitly recognised by the Commission, despite the
important economic contribution of SMEs to the European economy, they continue to
be underserved by banks.1
We strongly believe that a properly framed EU wide regulation would help to:
• create a level playing field and allow European crowdfunding platforms to expand their
support for SMEs across the Single Market;
• make the EU market more accessible for innovative entrepreneurs, start-ups and
small- and medium-sized companies;
• give investors across the EU a wider range of choices in how they allocate their capital;
and
• serve the aim of the EU’s Capital Markets Union to promote non-bank financing as an
alternative source of funding.
For these reasons, we support the concept of the European Crowdfunding Service Providers
Regulation (“ECSPR”) as originally proposed by the Commission and would very much
welcome a quick adaption and implementation
To date, significant differences in Member State legislation have made crowdfunding a largely
national issue. This has meant that the vast potential for cross-border capital flows has not
been tapped, leading to substantially less funding and fewer investment opportunities across
the EU than would be available under a unified regime. Lending and investment platforms
need to scale in order to compete domestically and internationally and grow into sustainable
businesses. It is only through a unified set of rules, as proposed by the Commission and
supported by the European Parliament, that a new regime will help create a robust and
thriving sector for the benefit of both investors and SMEs across the EU.
1
Proposal for Regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (ECSP) For Business, COM(2018) 113 final, page. 1.
European Crowdfunding Network AISBL | info@eurocrowd.org | www.eurocrowd.org

Office: 7th floor, NEO Building 51 Rue Montoyer | B-1000 Brussels | Belgium
A substantial challenge for many crowdfunding service providers, including those that operate
lending-based platforms, has been the license requirements imposed by some Member States
on project owners and investors. In some cases, national law has even required borrowers to
obtain licenses for deposit-taking and lenders to obtain licenses for the provision of credit. If
such license requirements were maintained, they would effectively prohibit the application of
the Regulation in the Member States in which they apply.
For all the reasons mentioned above, we strongly support an approach that ensures complete
consistency of rules across Member States. For the Regulation to reach its aims, it is crucial
that European crowdfunding players are not faced with the burdens and related costs of
identifying and complying with 28 different regimes across the EU. Many of these companies
are relatively small businesses for whom the costs of compliance and related infrastructure
would make it exceedingly difficult for them to operate on a cross-border basis. Today, only
very few crowdfunding platforms operate in more than one EU Member State due to
significant compliance and operational hurdles.
• We believe that the opt-in ‘29th regime’ would achieve this and is therefore a very
sensible approach. It will allow smaller platforms to avoid additional compliance and
operation cost by continuing to grow under their existing license requirements - while
at the same time provide clarity in those member states where bespoke requirements
are not yet defined - and give opportunity to more mature platforms to invest in
expanding their services across border. This will indeed allow for a smooth
transitioning period, both for smaller and more mature players while providing a
maximum of consumer protection and investor confidence to the market. It is also
aligned with the positions of the European Commission and the European Parliament.
• We believe that replacing Member States’ national regimes with fully harmonized EU
rules would also achieve the objectives of the ECSP proposal but add significant
compliance burdens and costs on all platforms currently operating under national
rules. While we would hope that full harmonization can be achieved within a short
period of time, we realize that the differences in the current legal frameworks in
Member States will not allow for a timely turnaround of such proposal.
• On the contrary, a minimum standards approach would, in our view, undermine the
objectives of the Commission’s proposal and leave the EU crowdfunding market in no
better shape than it is in today, highly fragmented. In such a scenario, legal and
regulatory barriers between Member States would persist and lending and

investment-based platforms, would have no incentive to scale across borders under
the new regime. Operational and compliance cost would remain a prohibitive hurdle
for most crowdfunding platforms and, as a result, would limit access to finance for
start-ups and small- and medium-sized companies, especially in smaller member states
but also for those seeking to expand their footprint across the European Union.
The Commission and the Parliament’s ECON Committee have made significant steps forward
in proposing rules tailored to the European crowdfunding market.
We urge EU Member States not to reverse this progress by opting for a minimum
harmonisation approach and to bear in mind the detriments a minimum harmonisation
approach would bring.
Thank you for your consideration.
Yours faithfully,
With special thanks to the members of the ESCP Working Group
The full list of our members can be found at https://eurocrowd.org/directory-of-members/


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Brussels, 17 December 2018

European Crowdfunding Network AISBL | info@eurocrowd.org | www.eurocrowd.org

European Crowdfunding Network AISBL | info@eurocrowd.org | www.eurocrowd.org

Thank you for your consideration.

With special thanks to the members of the ESCP Working Group

The full list of our members can be found at https://eurocrowd.org/directory-of-members/

European Crowdfunding Network AISBL | info@eurocrowd.org | www.eurocrowd.org

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