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.
- Mobilising private sources of long term financing
- Making better use of public funding
- Developing European capital markets
- Improving SMEs' access to financing
- Attracting private finance to infrastructure to deliver on Europe 2020
- Enhancing the wider framework for sustainable finance
Point four - i.e. Improving SME’s access to financing - involves crowdfunding. In fact the EC not only aims at improving the dialogue between SMEs and banks, hoping to help the former to identify best practises to access credit, but also to encourage the development of crowdfunding as valid funding source for SMEs, which constitute the backbone of the European economy. The EC recognizes the potential of crowdfunding - in all its forms - as financial source that could help enterprises “move up the funding escalator”, ultimately reducing the notorious “finance gap”.
In the communication on crowdfunding, the EC announced three action points in order to encourage the development of the crowdfunding market:
- It will establish an expert group on crowdfunding to gain knowledge and expertise to identify best practises in the sector and to start designing a quality label for crowdfunding platforms.
- It will raise awareness on this new financial source and foster knowledge about best practises.
- It will closely observe the development of legal frameworks for the phenomenon of crowdfunding in the different European countries to understand if there is a need for an intervention at EU level.
Another reason why the EC is evaluating whether there is a need for an intervention from its side on the legal framework for crowdfunding is that, according to the results of a survey it conducted recently, almost half of the securities crowdfunding portals which responded to the questionnaire would like to operate cross-borders. However, this at the moment is quite difficult to achieve, due to the high costs of complying with different local regulations.
Other issues that the EC wants to tackle are: how to ensure protection of the innovative ideas that use crowdfunding to get funds; and how public funds could be used to foster crowdfunding.
The challenges and the unsolved issues of crowdfunding are still manifold. However, it seems that the European Commission strongly believes that the crowdfunding market is here to stay, confirming, once again, what Crowd Valley has always believed since its foundation.
European Commission (2014). COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS. Unleashing the potential of Crowdfunding in the European Union
Image credit to: Motiqua: https://bit.ly/p/7ZgGX4
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.