The European Commission today unveiled an Action Plan designed to harness the opportunities presented by technology-enabled innovation in financial services. As a first major deliverable, it is announcing new rules that it believes will help crowdfunding platforms grow across the European Union's (EU) single market.
The plans have the objective of enabling the EU's financial sector to make use of the rapid advances in new technologies, such as blockchain, artificial intelligence and cloud services, while offering safer and easier access for new players, according to the statement. This will benefit consumers, investors, banks and new market players alike. In addition, the Commission is proposing a pan-European label, so that a platform licensed in one country can operate across the EU.
Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union, said, in a statement: “To compete globally, Europe's innovative companies need access to capital, space to experiment and scale to grow. This is the premise for our FinTech Action Plan. An EU crowdfunding licence would help crowdfunding platforms scale up in Europe. It will help them match investors and companies from all over the EU, giving more opportunities for firms and entrepreneurs to pitch their ideas to a wider base of funders.”
The Commisison believes that crowdfunding improves access to funding, especially for start-ups and other small businesses, However, it is currently difficult for many platforms to expand into other EU countries. This is why crowdfunding in the EU is underdeveloped as compared to other major world economies, and the EU market is fragmented. One of the biggest hurdles is the lack of common rules across the EU. This considerably raises compliance and operational costs and prevents crowdfunding platforms from expanding across borders, according to reseach undertaken by the Commission.
Input for the proposal on crowdfunding was gathered during preparatory work, including the CMU Action Plan of 2015, a public consultation of the CMU Mid-term review and the FinTech consultation of March 2017.
The Commiission believes that today's proposal will make it easier for platforms to offer their services EU-wide and improve access to “this innovative form of finance” for businesses in need of funding, states the Commission. 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. 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.
The Action Plan is part of the Commission's efforts to build a Capital Markets Union (CMU) and a true single market for consumer financial services. It is also part of its drive to create a Digital Single Market. The Commission aims to make EU rules more future-oriented and aligned with the rapid advance of technological development, says the statement.
The Commission has already created an EU Blockchain Observatory and Forum. It will report on the challenges and opportunities of crypto assets later in 2018 and states that it is working on a comprehensive strategy on distributed ledger technology and blockchain addressing all sectors of the economy.