Regulating Digital Platforms: the European Experience with Financial Return Crowdfunding

Despite a pandemic, crowdfunding continues to be a growing source of finance for small businesses across the EU. This article discusses nature and business typology of digital platforms that raise funds from the crowd. In the effort to support the ongoing uptake of new technologies in financial services, the first harmonised regime for the intermediation of financial instruments and loans to businesses via digital crowdfunding platforms has recently entered into application and promises to change the landscape of this financial service in the years to come. The new policy framework creates a robust EU-wide license, with requirements that support integration with social media, as well as the progressive creation of pan-European one-stop-shop platforms that offer multiple funding tools. Moreover, the regime also tests new boundaries in investor protection and behavioural finance, with the introduction of a system of warnings, targeted transparency on multiple levels and a conflict-of-interest framework to ensure that the platform acts as a risk neutral gatekeeper. The jury is still out and there are a number of unknowns, as this new framework will have to face the reality of well-established legal and supervisory national obstacles in its implementation.