European Crowdfunding License under the new European ECSP Regulation
Crowdfunding platforms are intermediaries helping investors and lenders finding businesses that need financing and helping businesspeople to raise capital. Crowd financing is the modern alternative to traditional bank financing and best solution to SME or start-up financing.
European Regulation on European Crowdfunding Service Providers (ECSP) came in to the force on 10 November 2021. New regulation predicts crowdfunding boom in continental Europe. European Union is the World’s biggest common market having 450 million consumers and more than 20 million businesses. Regulation creates common crowdfunding rules and the single license “passporting” regime in all European Union and European Economic Area (EU/EEA) allowing crowd financing platforms attract investors from all Europe.
The aim of the new regulation is to support cross-border funding and improve access to this innovative form of finance for small-medium enterprises (SMEs) and start-ups. European banks and other traditional lenders are not able to finance all the businesses because of the risk regulations and other risk mitigation and regulatory restrictions. Crowdfunding platforms provide a marketplace for other lenders to fill the gaps in business financing. Crowdfunding is an ideal financing tool for start-up financing letting lenders get the share in start-ups, lend them through loan agreements, securities, and token issues.
Rise of capital through loans, bonds, stocks, other securities, and token offerings
Licensed Crowdfunding platform operators are permitted to finance their client companies through crowdfunding platforms using different instruments:
- loan agreement;
- issue of debt securities (i.e. bonds);
- issue of equity securities (i.e. shares);
- assignment of claim rights deriving from existing credit agreements.
Modern financing instruments like Token Offering and Security Token Offering STO can be used to raise the capital for investment project through licensed Crowdfunding Platform. Securities offered through licensed Crowdfunding Platforms are allowed for public distribution in all European market of EU/EEA .
Pan-European Crowdfunding license for all EU/EEA under new ECSP Regulation
Even before the ESPC regulation Lithuania was one of few EU Member States having clear and transparent national crowdfunding regulation. Current Lithuanian crowdfunding regulation under the new European ECSP Regulation created new type of license of pan-European reach.
Lithuania is ne of the first EU/EEA jurisdictions launching fully passportabe pan-European Crowdfunding license under the new Regulation on European Crowdfunding Service Providers (ECSP). All applicants currently applying for crowdfunding the license in Lithuania may apply for the license of pan-European reach.
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