2 Popular Crowdfunding Regulations You Should Know
Posted: Tue Dec 24, 2024 6:26 am
We have seen an intensive development of the capital market since 2008. As a result, alternative ways of financing businesses have emerged, such as crowdfunding. The concept has recently attracted a lot of interest from various entrepreneurs and investors. It has become so popular that the EU legislator has started working on creating uniform crowdfunding regulations that would apply throughout the EU. In the United States, however, such a law has been in force for a long time. In the following article, you will read about 2 essential crowdfunding regulations.
2 Popular Crowdfunding Regulations – Table of Contents:
Europe – the ECSP regulation
The United States – The Jumpstart Our Business Startups (JOBS) Act
Summary
Europe – the ECSP regulation
The content of the Regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (in short: ECSP Regulation) was adopted in 2020. It entered into force in November 2021.
The crowdfunding regulations make crowdfunding platforms similar to benin whatsapp number database firms. The ECSP regulation applies only to crowdlending and equity crowdfunding . It does not apply to donation-based and rewards-based crowdfunding. The passage of this bill is expected to bring beneficial changes for both investors and entrepreneurs.
Main assumptions of the ESCP regulation:
The obligation for crowdfunding platforms to have a license and to be continuously monitored by the Financial Supervisory Commission – Business owners must apply for an authorization to carry out crowdfunding activities, and thanks to the license, they can operate throughout the European Union. In addition, entities with a dubious reputation and lack of legitimate opportunities for business success are rejected.
Campaign limit – Increased from €1 million to €5 million (2 year period to reach this limit).
Increased investor protection – Crowdfunding platforms should test the investor’s knowledge of the project, the correctness of their offer, as well as verify all the data included in the spreadsheet required for monitoring the investment. Entrepreneurs organizing a crowdfunding campaign should prepare an information sheet for investors, which should be written in a clear and understandable manner. It should also not exceed 6 A4 pages. This way, investors can efficiently assess the risk involved in a given investment.
There is no doubt that the ESCP regulation will bring several positive changes. Its main goal is to increase the security of crowdfunding . It contains information on essential documents, professional secrecy and a system for implementing new regulations.
Unfortunately, in addition to its numerous benefits , the ECSP regulation has many disadvantages. For example, it does not take into account some obstacles that entrepreneurs may encounter in the crowdfunding market, such as tax issues.
crowdfunding regulations
The United States – The Jumpstart Our Business Startups (JOBS) Act
The bill was signed into law by Barack Obama in April 2012 , and was the first attempt to regulate crowdfunding. In the United States, crowdfunding platforms are now regulated by both state and federal law. Parts II and III of this bill are considered the most important when it comes to fundraising by startups , and the development of crowdfunding itself. The bill was designed to support micro-businesses in the United States.
2 Popular Crowdfunding Regulations – Table of Contents:
Europe – the ECSP regulation
The United States – The Jumpstart Our Business Startups (JOBS) Act
Summary
Europe – the ECSP regulation
The content of the Regulation of the European Parliament and of the Council on European Crowdfunding Service Providers (in short: ECSP Regulation) was adopted in 2020. It entered into force in November 2021.
The crowdfunding regulations make crowdfunding platforms similar to benin whatsapp number database firms. The ECSP regulation applies only to crowdlending and equity crowdfunding . It does not apply to donation-based and rewards-based crowdfunding. The passage of this bill is expected to bring beneficial changes for both investors and entrepreneurs.
Main assumptions of the ESCP regulation:
The obligation for crowdfunding platforms to have a license and to be continuously monitored by the Financial Supervisory Commission – Business owners must apply for an authorization to carry out crowdfunding activities, and thanks to the license, they can operate throughout the European Union. In addition, entities with a dubious reputation and lack of legitimate opportunities for business success are rejected.
Campaign limit – Increased from €1 million to €5 million (2 year period to reach this limit).
Increased investor protection – Crowdfunding platforms should test the investor’s knowledge of the project, the correctness of their offer, as well as verify all the data included in the spreadsheet required for monitoring the investment. Entrepreneurs organizing a crowdfunding campaign should prepare an information sheet for investors, which should be written in a clear and understandable manner. It should also not exceed 6 A4 pages. This way, investors can efficiently assess the risk involved in a given investment.
There is no doubt that the ESCP regulation will bring several positive changes. Its main goal is to increase the security of crowdfunding . It contains information on essential documents, professional secrecy and a system for implementing new regulations.
Unfortunately, in addition to its numerous benefits , the ECSP regulation has many disadvantages. For example, it does not take into account some obstacles that entrepreneurs may encounter in the crowdfunding market, such as tax issues.
crowdfunding regulations
The United States – The Jumpstart Our Business Startups (JOBS) Act
The bill was signed into law by Barack Obama in April 2012 , and was the first attempt to regulate crowdfunding. In the United States, crowdfunding platforms are now regulated by both state and federal law. Parts II and III of this bill are considered the most important when it comes to fundraising by startups , and the development of crowdfunding itself. The bill was designed to support micro-businesses in the United States.