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The European Commission implemented an action plan - The Capital Markets Union (CMU) - to mobilise capital in Europe.

 

EDC News: EU Crowdfunding

In September 2015 the Commission adopted an Action Plan on Building a Capital Markets Union (CMU). The basis of this action plan is to broaden access to finance for SMEs, artists, innovative start-ups, social entrepreneurs. One chosen method for accessing funding is crowdfunding. Crowdfunding is a growing, alternative source of finance for Europe's businesses. It is finance obtained through donations, monetary contributions in exchange for a reward, product pre-ordering, lending, or investment via open calls (crowdfunding campaign) generally posted on the internet.

There are different types of crowdfunding. The Commission is currently focusing on the following three:

  • Reward-based crowdfunding – this is a donation-based funding but with the expectation of receiving in return a non-financial reward, such as goods or services

  • Equity crowdfunding – similar to purchasing stocks on the stock exchange; many investors are sold stakes in a business in return for investment

  • Peer-to-Peer lending – follows the same process of the traditional borrowing system where money is loaned (from the crowd [many investors]) with the understanding that the money will be repaid with interest

EU Member States have begun to put in place national frameworks to support the growth of the crowdfunding sector and ensure investors are appropriately protected. These national frameworks are broadly consistent in terms of the objectives and outcomes they seek to achieve, but are tailored to local markets and domestic regulatory approaches. Crowdfunding is still in its early stages and yet requires an EU level framework, although the Commission continuous to review the developments in this sector.

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