EU Readies For Newly Licenced P2P & Crowdfunding Firms Influx
Summary
The new European Crowdfunding Service Provider Regulation (ECSPR) has been effective since November 2021. With six crowdfunding platforms already licensed, and a number of applications still pending, this creates a new market for peer-to-peer lending and equity crowdfunding in Europe.
EuroCrowd executive director Oliver Gajda has been on the frontline of this regulation for the past few years and knows better than most how transformative it could prove. He predicts an influx of newly licensed crowdfunding and P2P lending platforms across Europe, leading to the development of new fintech hubs across the continent.
Gaida notes that ‘It’s still early days, and the market is wide open to new entrants and old ones. But I believe that, within the first six months of 2023, the number of active licences will increase significantly. There is also increasing competition amongst European regulators, raising hopes of new fintech capitals across the Union.’
The deadline for all nationally-licensed platforms to convert to an ECSPR licence is November 2023. But at a recent networking event organised by EuroCrowd and the law firm Dentons, the European Securities Markets Authority (ESMA) said that it believed the transition could be finalised well before this date.
The entire authorisation process is believed to take between five and nine months, during which time the quality of the internal processes, legal business plans, and operational systems would be tested in detail. Once licensed, a platform can operate in any EU market.
Gaida added ‘Of the first six platforms to obtain the ECSPR licence, the three largest have shared their expertise with the new licensees. While obtaining the licence was less straightforward as the platform had hoped, it provided significant benefits once obtained.’
UK-based Crowdcube became the first EU licence holder, via its Spanish subsidiary Crowdcube Europe. Since then, the company has expanded into France, the Netherlands, Belgium, and Scandinavia, and funded more than 20 deals under the new permissions.
Meanwhile, Dutch platform Lendahand Ethex, which funds clean energy projects in Africa, has used its licence to further expand its business model by taking advantage of a clause in the law that allows it to finance businesses outside of the EU. This legal detail has not gone unnoticed by UK platforms.
Gaida concluded that ‘Expansion into the EU can help increase capital inflow for the UK market. This is also possible for non-UK platforms, as the new rules allow European platforms to finance transactions in the UK. This is unlikely to be their first move, as there are more opportunities at present in the European market, but it is only likely to be a matter of time.’