Crowdfunding And ICOs

Author:Mr Fergus Bolster
Profession:Matheson
 
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European Commission Announces Proposals in Fintech Action Plan

On 8 March 2018, the European Commission published a Fintech Action Plan for a more competitive and innovative European financial sector.

The Action Plan has three main objectives:

to support innovative business models to scale up across the single market; to encourage the uptake of new technologies in the financial sector; and to increase cybersecurity and the integrity of the financial system. The Action Plan sets out a number of proposals to advance these objectives, including in the areas of crowdfunding and initial coin offerings (or ICOs):

Crowdfunding

The Commission has announced a proposal for the introduction of an EU Regulation in the area of crowdfunding.

Crowdfunding is the term given to the practice of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically via an online platform.  It is a form of alternative fundraising structured to fall below the offer threshold at which the requirement to produce an EU securities law prospectus is required (€5 million).  Crowdfunding can improve access to capital for certain types of businesses, especially start-ups and other small companies, which can market their projects via the internet and call for support in the form of a loan or equity from investors.  Crowdfunding investors are largely individual investors looking to commit a small amount of money to a project but can also include institutional investors and venture capitalists.  Today crowdfunding is mainly conducted on the basis of national legislation, which means that platforms are subject to diverging rules depending on the country in which they operate.  This raises compliance and operational costs and makes it difficult for crowdfunding platforms to provide their services cross-border.

The Commission's proposal is intended to make it easier for crowdfunding platforms to offer their services EU-wide.  Once adopted by the European Parliament and the Council, the proposed Regulation will allow platforms to apply for an EU label based on a single set of rules. This will enable them to offer their services across the EU.  Furthermore, investors on crowdfunding platforms will be protected by clear rules on information disclosures, rules on governance and risk management and a coherent approach to supervision.

ICOs

Regulators in many countries worldwide have been assessing market...

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