In March 2018 the European Commission issued a proposal for a regulation on crowdfunding service providers (“CSPs“) (the “Proposal“) as part of its broader FinTech action plan. CSPs operate online platforms which facilitate investments in innovative companies, start-ups and other unlisted firms companies by private investors. The Proposal plans to enable CSPs to offer their services across Europe more easily and also to improve access to CSP services across the EU.
On 10th August 2018, the European Parliament’s Committee on Economic and Monetary Affairs (“CEMA“) issued a draft report (the “Report“), drafted by Ashley Fox (British MEP), seeking to extend the Proposal to cover service providers in the blockchain space.
An initial coin offering (“ICO“) is a method of raising funds from the public by issuing virtual tokens (often on a time-limited basis) in exchange for either fiat or virtual currencies. ICOs have become a popular method of raising capital for budding companies harnessing blockchain technology.
The amendments proposed by CEMA aim to improve investor confidence and reduce the risk of exposure to fraudulent activity through ICOs.
In addition, CEMA has tabled the following amendments in relation to the Proposal:
- CEMA recommends that the maximum consideration threshold for each crowdfunding offer should be increased to EUR 8 000 000, to align with the exemption for offers of securities to the public from the obligation to publish a prospectus under Article 3 of the Prospectus Regulation (EU) 2017/1129.
- Whereas the European Securities and Markets Authority (“ESMA“) takes a leading supervisory role in the original Proposal, CEMA recommends that the role of national competent authorities in supervising CSPs should be enhanced, on the basis that national regulators are closer to their respective markets and will be able to supervise CSPs more efficiently than ESMA.
- CEMA recommends applying different disclosure requirements to (i) platforms that match investors with project owners and (ii) platforms that determine the pricing and packaging of crowdfunding offers.
- CEMA recommends allowing CSPs based in third-countries to become authorised by competent authorities to provide their services within the EU, provided that those third-country CSPs are suitably authorised in their own jurisdiction and adhere to the same rules as CSPs based within the EU.