The European Commission has proposed crowdfunding “passports” for the European Union in a draft law that forms part of efforts to boost growth in the financial technology sector.
Crowdfunding allows start-ups to collect small sums of money from many individuals as an alternative to a bank loan, still the main source of funding for small and medium sized companies.
“An EU crowdfunding license would help crowdfunding platforms scale up in Europe,” the EU’s financial services commissioner Valdis Dombrovskis said in a statement.
“It will help them match investors and companies from all over the EU, giving more opportunities for firms and entrepreneurs to pitch their ideas to a wider base of funders.”
The Commission set out a range of measures on Thursday to encourage growth and job creation in fintech to wean the region’s economy off its heavy reliance on bank funding, a core aim of the EU’s wider capital markets union project.
But the crowdfunding passport plan was the only one proposed as draft legislation.
Britain, a big fintech hub in Europe with its own crowdfunding licensing regime already, leaves the bloc next year and Brussels is keen to make the EU an attractive location for fintech firms. Without a favorable trade deal, UK-based fintech firms will not be able to serve EU customers from Britain.
“It’s more important that we develop capital markets across the EU as there are going to be consequences from the EU’s largest market leaving the EU,” Dombrovskis said.
There are no EU-wide rules for crowdfunding currently, meaning businesses and entrepreneurs have to deal with a patchwork of national rules, which can be costly.
