On 5 October, the European Parliament adopted a Regulation on European Crowdfunding Service Providers for Business. The regulation entered into force on 20 October 2020 opening much wider opportunities for crowdfunding service providers, investors, and project owners looking for alternative sources of financing, as well as for Lithuania.
Easier access to new markets for crowdfunding service providers
The new regulation allows a crowdfunding service provider licensed in one Member State to provide cross-border services in other Member States. This will lead to easier access for investors from other EU countries, and will ensure lower operational and compliance costs for market players with a cross-border ambition.
The regulation also recognizes business models that are relevant for the market. For example, the regulation lays down specific requirements for providers to be able to automatically allocate funds to crowdfunding projects, as well as the possibility to organize secondary trading in securities on a crowdfunding platform.
Wider opportunities for investors
Investors now have the opportunity to invest in projects through a much wider range of crowdfunding service providers, who will be able to actively promote their services beyond the home state. Investors are also able to demand the same standard of protection of their interests regardless of the home state of the service provider.
Additional funding source for businesses
The development of the crowdfunding sector primarily means access to alternative financing for small and medium-sized businesses. If the new regulation increases competition in the sector, businesses will be among the first to benefit. Unlike some other forms of financing, crowdfunding also provides an opportunity to validate a business idea, promote it, and receive feedback from a wide range of potential investors.
Advantages of Lithuania’s extensive experience in regulating this field
Even before the entry into force of the new regulation, Lithuania stood out for its advanced regulation of crowdfunding. This means that the Bank of Lithuania, which supervises this market, has a good understanding of such business models and has a good track record in licensing and supervising service providers. The emergence of the new regulation is a great opportunity to use this experience by attracting new crowdfunding players and foreign investment to Lithuania and to encourage the development of another business financing alternative.