Regulation on European Crowdfunding Service Providers (ECSP)
Latest information on ECSP-licensed Crowdfunding Platforms
What is ECSP Regulation?
The EU market for crowdfunding is underdeveloped compared with other major world economies. For many years, one of the biggest hurdles faced by crowdfunding platforms seeking to offer their services across borders has been the lack of common rules and diverging licensing requirements across the European Union. This has resulted in high compliance and operational costs, which prevented crowdfunding platforms from efficiently scaling the provision of their services.
Therefore, the Regulation on European Crowdfunding Service Providers (ECSP) lays down uniform rules across the EU for the provision of investment-based and lending-based crowdfunding services related to business financing. It allows platforms to apply for an EU passport based on a single set of rules, which makes it easier for them to offer their services across the EU with a single authorisation.
On 10 November 2020, the ECSP Regulation was adopted. The rules entered into application on 10 November 2021, applying directly across the EU. New platforms need to apply for this European license to offer their services in countries in Europe. Existing crowdfunding platforms will be able to use a transition period of 24 months to apply for the new license until 10 November 2023.
The new rules are expected to increase the availability of this innovative form of finance, which will help companies seeking alternatives to bank financing. Investors on crowdfunding platforms, meanwhile, will benefit from an aligned and enhanced investor protection framework, based on:
- clear rules on information disclosures for project owners and crowdfunding platforms
- rules on governance and risk management for crowdfunding platforms
- strong and harmonised supervisory powers for national authorities overseeing the functioning of crowdfunding platforms.
ECSP Licensed Crowdfunding Platforms
Under the ESCP regulation, a crowdfunding platform may solicit investors across all EU members streamlining the capital raising process in Europe.
Please find below a list of ECSP licensed crowdfunding platforms that provide alternative financing services across EU:
Lendahand🔗
Lendahand is the first Dutch crowdfunding platform to receive the new European Crowdfunding Service Provider (ECSP) license from the Dutch Authority for Financial Markets (AFM), and is the second platform in all of Europe.
As one of the leading Dutch crowdfunding platforms, Lendahand combines social impact with financial return in a sustainable way that benefits investors who wish to invest in SMEs in emerging markets. The platform’s mission is to fight poverty in emerging markets by investing in people and businesses. Since it’s creation in 2010, Lendahand has achieved 131 million of investment, funding 2,958 projects in total.
The CEO and Co-founder Koen The says:
“The new European Crowdfunding Regulation allows us to recruit more investors and enable more investments in developing countries. It brings us one step closer to our goal of closing the funding gap for underfunded SMEs.
…(Lendahand) will be able to offer a service where investors’ funds are automatically reinvested in pre-selected projects. It’s a functionality we’re currently working on.”
Lendahand: The first ECSP-licensed Dutch platform
Lendahand also has had a MiFID license since 2016 and has been under the supervision of the AFM for more than 6 years. With the new ECSP license, Lendahand will be able to offer services across the European Union and allow investors to benefit from an aligned and enhanced investor protection framework.
Crowdcube 🔗
Crowdcube is a platform that has long operated a subsidiary in Spain, received approval from the Spanish regulator Comisión Nacional del Mercados de Valores (CNMV). In April 2022, Crowdcube has become the first investment crowdfunding platform to be approved under the new European Crowdfunding Service Provider (ECSP) Regulation.
Since November 2021, Crowdcube has set an aim to become one of the very first platforms to operate under new European Union regulations. After obtaining the ECSP license, an issuer may solicit investors across all EU members streamlining the capital raising process in Europe.
In a blog post, Crowdcube stated:
“We’re proud to be part of the UK equity crowdfunding market, a global leader in connecting retail investors with the most exciting high-growth companies.
But while Crowdcube was founded in Britain, we have always had European investor interest on our platform. That’s why we are delighted to announce that Crowdcube has become the first equity crowdfunding platform to be granted a European Crowdfunding Service Provider authorisation.”
Crowdcube Team: Funding the wonderful
While investors may anticipate that other European securities crowdfunding platforms will soon join Crowdcube as European providers, Crowdcube is in an excellent position to benefit from its UK base, access to the EU Market along with its partnership with SeedInvest in North America.
Villyz 🔗
Founded in March 2020, Villyz is an online investment platform based in Paris, France. It is the first French platform licensed by ECSP, receiving the approval to offer securities across the European Union under the ECSP Regulation.
Villyz provides lending-based crowdfunding services. Investors can crowdfund a loan and grant it to a community to carry out a project of general interest. It allows investors to support projects that matter to them, to diversify savings with a low-risk investment, while bringing a strong local impact.
The platform offers local communities a new form of financing: citizen financing. Citizen financing is an innovative and democratic method of financing for local authorities. Simple and transparent as bank financing, citizen financing allows communities to borrow directly from citizens to carry out one or more projects of general interest. Citizens have a simple and transparent way to invest their savings in the service of their territory.
During a citizen financing campaign, the Villyz platform takes care of identifying the lenders, giving them access to the projects and making their payments. The reimbursement of citizens by community is also fully automated by Villyz.
Villyz – The first ECSP licensed French crowdfunding platform
Villyz is a niche platform that provides funding for “community projects” via crowdfunding loans. It is also one of a few platforms that has been approved to label projects as green crowdfunding projects – as determined by the Ministry for Ecological Transition. Villyz is one of a few European platforms to be approved for pan-European investment crowdfunding but many platforms are in the process of gaining the status under the ECSP Regulation.
Spreds🔗
Founded in 2011, Spreds offers investors an easy way to invest in businesses that improve their surrounding world. In October 2022, Spreds has become the first crowdfunding platform in Belgium to have obtained the new approval from the Financial Services and Markets Authority (FSMA), the Belgian financial markets regulator.
“We had already been the first to obtain the Belgian accreditation in 2017.” stresses Charles-Albert de Radzitzky, the CEO of Spreds, who believes the platform continues to play a pioneering role as the only Belgian platform approved by FSMA so far.
Initial founders of the Belgian crowdfunding platform Spreds
Spreds is an investment platform that focuses on equity and loan crowdfunding for campaigns. The platform has developed the first fully regulated platform that combines an online digital investment portfolio and an accredited, tax transparent and compartmentalised legal structure that connects innovative entrepreneurs with passionate investors.
Till today, Spreds has funded 267 businesses, adding up to more than €50,000,000 invested on the platform with a trusted, industry-leading platform with 44,678 members.