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ECSP: Harmonised Regulations and Technical Standards – What Now?

The European Securities & Markets Authority (ESMA) harmonised the regulations for European Crowdfunding Service Providers (ECSP) on the 10th of November, 2021, as promised. 

The new standards and regulations are coming into force in 27 EU member states and are forming a new framework under which crowdfunding platforms are going to operate. 

In their blog, the European Commission wrote: 

Crowdfunding service providers offering financial services will operate under the same license for lending and securities – as well as some national instruments that will be subject to the new rules.

Followed by a large report on 218 pages, the European Commission highlights the need to develop the technical standards for crowdfunding platforms, including, but not limited to:

  • Business continuity plan
  • Authorisation for new and existing ECSPs
  • Information to client on default rate of the projects on a crowdfunding platform
  • Entry knowledge test and simulation of the ability to bear loss in regards to non-sophisticated investors
  • Key investment information sheet for investors to help them make informed decisions
  • Reporting requirements for ECSPs and clients

ECSP regulations are coming into force, what’s next?

EUROCROWD will run the 10th Crowdfunding Convention on the 18th of November of 2021 on the implementation of the new rules for ECSPs. The event is not going to be public, so in order to participate, you need to sign up

At the event, EUROCROWD aims to cast some light upon the opportunities in EU, how the rules will affect the existing crowdfunding platforms and service providers and how CPS can provide funding for illiquid assets. 

What to prepare for?

So, will the heads roll as it usually happens with the new rules? What’s going to happen to the current crowdfunding platforms that have recently started out or even operated for a while now?

As always, the changes in regulations will generate more work for the legal service providers and business analysts to identify the risks, challenges, and opportunities. Lots of emails and calls will also fly towards the competent authorities and regulators, so the queue for new information is going to be pretty big. 

Is it the right time for new crowdfunding businesses to launch their platforms or at least book a spot to get into the market as early as possible? It might be. 

Crowdfunding software requirements

At LenderKit, we’ve prepared for the new challenges and changes in the regulations by releasing a new EU regulations module. 

The LenderKit crowdfunding software is now updated for a fresh start in the EU crowdfunding market and will help new businesses launch smoothly. 

We’ve covered the major pain points, including: 

  • Regulation settings
  • EU investor categories
  • Investor assessment
  • Acceptance criteria
  • Key investment information sheet
  • Made a few changes to the UI/UX
  • Tweaked validation and notifications

If you are looking for the crowdfunding software to start a crowdfunding platform in Europe and ease the compliance with the ECSP regulations, book a call with our Fintech Strategist for an online demo. 

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