On November 10, 2021, the Regulation on European Crowdfunding Service Providers (ECSP) for business entered into force. Crowdfunding platforms have been given a 12-month transition period which was extended to November 10, 2023. While some platforms are waiting to obtain an ECSP license, some companies have already completed all the procedures and become ECSP-licensed crowdfunding platforms.
CrowdCube is the first crowd investment platform that obtained the ECSPR license in Spain. The platform is based in the UK and is authorised by the Financial Conduct Authority (FCA). Two CrowdCube’s subsidiaries operate in Spain and Sweden and are regulated by the Comisión Nacional del Mercado de Valores (CNMV), which has issued the ECSP license to the platform.
Now, the platform enables startups to raise up to €8 mln in the UK and up to € 5 mln in the EU. The platform places the funding cap at € 13 mln per 12 months.
With the European crowdfunding license, the platform expects to expand its services into new markets across Europe and provide investors with greater access to businesses all around the continent.
Lendahand is the first Dutch-based crowdinvesting platform that has received the ESCP license from the Netherlands Authority for the Financial Markets (AFM). Until now, crowdinvesting platforms have used the exemption for crowdinvesting activities. But with the new pan-European crowdfunding legislation, all the platforms must obtain a new license until November 10, 2023.
Even though Lendahand has had a MiFID license since 2016 and has been under the AFM’s supervision, it took more than 8 months to obtain the ESCP license.
Under the MiFID license, the platform was allowed to operate in all European countries; however, each country had to receive a special “passport”, which was a time-demanding and laborious process.
With the license, the crowdinvesting platform also receives permission to operate in all the EU countries without additional authorisations. The new license will enable investors to benefit from a broader range of offerings and additional information that shall be provided by each project, such as calculating risks, defaults, and payment arrears.
The Lendahand team comments that one shall not underestimate the time and energy needed to prepare all the documents and complete the process. But getting a license means being able to offer services beyond national borders and accessing a wider range of investors.
CrowdedHero is the first Latvian crowdinvesting platform and the third platform in the EU with an ECSP license. The decision to issue it to CrowdedHero was adopted on 16 August this year by the Board of the Financial and Capital Market Commission.
CrowdedHero is an equity-based crowdinvesting platform that offers an opportunity to invest for accredited and non-accredited investors. Still, the main target is individual investors between 25-45 years old who live in the EU. The platform supports crowdfunding campaigns from mature companies and startups.
With a minimum investment of €100, the platform aims to make investment affordable.
LANDE, formerly LendSecured, is a Latvia-based crowdinvesting platform focusing on crowdfunding for the farming industry. The platform was ready to apply for the ECSP license even before the pan-European crowdfunding legislation was accepted, but for now, the platform is still in the process.
LANDE planned to become the first among ECSP-licensed crowdfunding platforms in Latvia, but the merger with LendSecured delayed the process. Now, the regulator has conducted the primary due diligence and authorised the further operation of the crowdinvesting service provider through the licensing process. During the due diligence process, the regulator checked whether the services provided to investors were safe and whether the team had the required experience in the industry.
Villyz is a French crowdfunding platform that focuses on impact lending and combines bank credits with personal loans to finance projects. The platform received the ECSP approval on September 6, 2022.
The platform has just started out, but it’s already helping to finance medical buildings and is likely to focus on impactful and socially responsible real estate and other projects.
Spreds is the first Belgium crowdfunding platform that is approved under the ECSPR, according to CrowdfundInsider. The company was founded in 2011 and was approved under the national rules in 2017.
Spreds is a Software as a Service platform that offers online tools for investors and fundraisers to create, manage, invest and handle legal, administrative and financial tasks.
Why does the ESMA extend the ECSP authorisation period?
When the new European Crowdfunding Service Provider Regulation (ECSPR) was introduced, all member state regulators were tasked with creating updated rules to enable a smooth transition to pan-European crowdfunding. To ensure that all countries have enough time to do so, the European Commission gave one year of the transition period.
Some countries acted quickly to construct legal frameworks that enabled ECSPR, while others struggled to adjust old rules to the new reality.
In May 2022, Financement Participatif France (the French Crowdfunding Association) and the Bundesverband Crowdfunding e.V. (the German Crowdfunding Association) requested to extend the transition period for one more year. Neither Germany nor France managed to create a process for the platforms to apply for an ECSP license on time.
The transition period was extended for one more year, with a new deadline on November 10, 2023. After this date, we don’t expect ESMA to extend the period for another year. The platforms that haven’t obtained an ECSP license by November 10, 2023, are likely to suspend their operations until they get a license.
On a side note
Nothing will change for ECSP-licensed crowdfunding platforms such as CrowdCube, Lendahand, and CrowdedHero. They can already provide their services on the entire EU territory.
- The European Securities and Market Authority urges those platforms that haven’t applied for a license to hurry up. In countries where regulators rapidly adjust to the new requirements, many crowdfunding platforms are working on the ECSPR application process. In some countries, all platforms have applied for a new license.
- This extension will give some extra time to complete the European ECSP registration process for crowdfunding platforms that have already submitted their applications. But the given time is not as long as it seems because the application process takes 6-8 months on average.
- In France and Germany, submitting applications for a license was thought to be impossible because the regulators hadn’t adopted changes to the local regulation until recently. However, Villyz, a crowdfunding platform in France, claimed to be the first platform that gained an ECSP approval on September 6.