Crowdinvesting is a relative recent phenomenon which is growing in many different countries around the world. Several people have heard about equity crowdfunding or peer to peer lending only in the last couple of years. Nevertheless, as young as it may seems, crowdinvesting, especially in the form of P2P lending, has been out in the market for while: some pioneering companies have been operating since the early 2000s, while GrowVC itself - i.e. Crowd Valley’s parent company- has been active in the online investment space since 2009. In the past few days crowdinvesting has reached a new milestone with the IPO filing of one of the most established peer-to-peer lending platform in the US.
A recent public consultation launched by UK’s government determined that P2P lending will have increasingly a central role in SMEs finance. In fact, starting later this year, British SMEs will have the chance to be linked up by banks to alternative finance providers - such as P2P lending portals -, when rejected by traditional credit providers.
“Economic Crisis”. A term we heard a lot in recent years and, unfortunately, we still hear today in Europe and in the US. Yes, because the economic crisis is still a reality in many cases, especially among small businesses, one of the backbones of western economies.
Peer-to-peer lending in the UK is growing at an incredibly fast speed. Favored by FCA’s rules that treat peer-to-peer lending in a different way than equity crowdfunding, which is considered riskier, and by the tax discount (New ISA) which has been available since beginning of July, this new mechanism for borrowing capital is becoming more and more popular.
More and more national regulators are working to provide a legal framework to allow securities crowdfunding. After many Western countries, like the US, the UK, France and Italy, securities crowdfunding entered in the agenda of some Eastern countries’ financial authorities too, like Japan’s and Australia’s. It is now the turn of India, where the Securities and Exchange Board of India (SEBI) has launched in the past week a public consultation on the drafted rules for securities crowdfunding.
Crowdfunding is quickly changing the way we are investing, but unfortunately, the online payment processing industry has been rather slow to update, causing roadblocks and mistrust for investors as well as for companies seeking financing. PayPal is paving the way to embracing crowdfunding as they adjust company policies.
On March 14th 2014, Japan’s Prime Minister Abe and his Cabinet approved a de-regulation of equity fundraising to the Financial Instruments and Exchange Law paving the way for companies, especially startups, to raise finance through crowdfunding.
Her Majesty (HM) Treasury has announced that as of July 1st, 2014 peer-to-peer lending is being given tax discounts for the first time in UK history. The radical reformation will take place within the Individual Savings Account (ISA) system.
On March 27th, the European Commission (EC) published a communication on crowdfunding as part of the roadmap to meet long-term financing needs of the European economy, which aims at fostering sustainable growth in the Union.
Although the news was anticipated a few days earlier, due to a leak of information promptly reported by the main newspapers, the actual communication on crowdfunding still brings along some interesting news.
The FCA has announced their regulatory approach to crowdfunding and it will have direct impact on the sector. Investors will be better protected and platforms will have to adhere to rules already commonplace within the wider financial services industry. This deliberate positioning of crowd funding within the financial services industry and not tech or social media is a good move for the sector. The fear that regulation will strangle burgeoning businesses is misplaced as most companies already work to the standards, but new entrants from the tech or social media sectors will have to structure and manage their affairs correctly.