Crowdfunding

Crowdfunding is an alternative form of financing that connects those who can give, lend or invest money directly with those who need financing for a specific project. It usually refers to public online calls to contribute finance to specific projects. Several crowdfunding models have emerged within the European Union over the past few years (donation-based crowdfunding, lending-based crowdfunding, investment-based crowdfunding, reward-based crowdfunding, …), but only some of them fell within the scope of the laws and regulations of the financial sector, depending on the characteristics of the platform, on a case-by-case basis.

In order to foster the development of crowdfunding platforms within the European Union, the European Commission adopted Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European Crowdfunding Service Providers for business and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937 (the “Regulation”). The Regulation is directly applicable in all Member States since 10 November 2021.

The Regulation only applies to crowdfunding services provided to non-consumer project owners relating to offers for an amount of up to EUR 5,000,000 calculated over a period of twelve months per project owner. The Regulation created a new legal status of European Crowdfunding Service Providers (“ECSP”) and allows ECSP to apply for an EU passport, based on a single set of rules. The investors on crowdfunding platforms benefit from a strengthened protection regime based on clear rules on, namely, information disclosures for project owners and crowdfunding platforms, in the form of a “key investment information sheet”, marketing communication, governance and risk management and harmonised supervision.

Since 10 November 2021, the provision of crowdfunding services from Luxembourg is subject to the obtention of a license as ECSP as well as the prudential supervision of the CSSF. Should an ECSP intend to provide payment services in addition to the crowdfunding services, a separate licence under the Law of 10 November 2009 on payment services may be required.

In the interest of legal certainty and in view of the replacement of national rules by the rules set out in the Regulation insofar as types of crowdfunding services are concerned, which are now included within the scope of the Regulation, Article 48 of the Regulation introduced a transitional period allowing persons providing such crowdfunding services in accordance with national law preceding the Regulation to adapt their business activities to the Regulation and to have sufficient time to apply for an authorisation thereunder.

In response to a question raised by the European Securities and Markets Authority (“ESMA”), the European Commission clarified that the provisions of Article 48 of the Regulation, according to which existing crowdfunding service providers operating under national law may continue to provide services within the meaning of the Regulation, according to the applicable national law, until 10 November 2022, apply also to crowdfunding service providers operating in a  jurisdiction where no national law is applicable (cf. Question 2 of the document “Questions and Answers on the European crowdfunding service providers for business Regulation” published by ESMA).

The Regulation was implemented in national law by the Law of 25 February 2022 (only in French), which was published in the Memorial on 4 March 2022 and which entered into force as per 8 March 2022.

Any contact request regarding crowdfunding must be made via the following email address: crowdfunding@cssf.lu

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