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Crowdfunding to get a boost from EU

Friday, March 21 11:24:05

A European Union "quality label" and possible state aid for crowdfunding would help the 1 billion euro sector grow to fund economic growth, the bloc's executive body said in a document seen by Reuters.

Crowdfunding allows individuals and small businesses to raise money from pools of investors who can put money into peer-to-peer lending schemes or securities such as unlisted shares.

It is often hosted on online platforms such as Crowdcube, Funding Circle and Kickstarter.

The European Commission, in a draft document to be published next week, said crowdfunding has real potential to finance certain types of projects.

"Crowdfunding is an important source of finance to some half a million European projects each year that otherwise may not obtain the necessary funds to be realised," the document said.

The document will be published alongside a blueprint setting out ways of boosting market-based finance at a time when small companies find it harder to get loans from banks that are focusing on increasing regulatory capital buffers.

The EU executive will conduct two studies this year; the first into how crowdfunding is used, the second into its potential for funding research and innovation, the document said.

Several EU states have already begun introducing rules for crowdfunding, but the Commission document signals that Brussels is cautious about stepping in too soon with pan-EU regulation.

"The Commission will continue to monitor the market and assess the need for regulatory action as a response to changing circumstances," the document said.

This week Britain's finance ministry decided to allow the inclusion of crowdfunding in popular tax-free savings accounts after the country's financial regulator introduced new rules for the sector.

Several Canadian provinces published proposals this week to harness crowdfunding to help business start-ups.