NEW CROWDFUNDING & P2P LENDING REGULATIONS IN EU

by IBCCS | Feb 18, 2022 | Estonia

According to the new regulations, a crowd service provider “CSP” that facilitates either investment-based crowdfunding or peer-to-peer business lending via its platform is required to be authorized by a relevant national competent authority (NCA) in the EU Member State; post-authorization, your CSP can “passport” the CSP license throughout the EEA, i.e., similar to the passporting of the provision of payment services throughout EEA.

If your CSP is established outside of the EU and wishes to continue to provide services in the EEA, you are required to establish in the EU and apply for a CSP Licence from an EU Authority in accordance with the Regulations. If your Firm is already established within the EU, your Firm is required to adopt the EU CSP Regulations and seek regulatory license authorization in accordance with the Regulations.

The new regulation applies to crowdfunding offers with a total value of up to EUR 5 million over a 12-month period. As the Prospectus Regulation allows Member States to derogate from the obligation to publish a prospectus in a public offer of securities until the raising of funds up to EUR 8 million. Projects offered through crowdfunding will unequivocally be subject to a limit of EUR 5 million, which means that under this regulation, securities of up to EUR 5 million can be offered to the public through authorized crowdfunding platforms without the obligation to draw up a prospectus.
Minimum prudential requirements are also set for crowdfunding service providers. Namely, the service provider must have its own funds or an insurance policy, which at any time is at least EUR 25 000 or one-quarter of the fixed overheads of the previous year.
The rules established to protect investors are similar to those established for other investment service providers
Minimum due diligence measures that shall be taken by the CSP for project owners who offer their projects through their platform are also defined. The CSP must verify that the project owner does not have a criminal penalty and that it is not a legal person established in a high-risk third country or non-cooperating region.
A CSP has the responsibility of ensuring the preparation of a key investment information sheet for each crowdfunding offer. Although the document is prepared by the project owner, the CSP must have procedures in place to verify the completeness, accuracy, and clarity of the key information sheet.

IBCCS TAX is working with a number of EU/non-EU firms with regard to EU CSP, Payment Services, cryptocurrency exchange licensing.

Estonia is the leader in the European crowdfunding and cryptocurrency industries, and it’s possibly the best place to establish your new business.

Its possibly the best time to set up a legal structure in Estonia now to be prepared for the upcoming regulations.

Please feel free to reach out to us for a consultation.

At IBCCS TAX we are experienced international tax planning advisers offering legal & tax advisory assistance both on an international and local scale. Having fully-fledged offices in Cyprus, Estonia, Georgia, Poland and United Kingdom we can provide a full range of fiduciary services and management of entities in these and other reputable jurisdictions.