The EU Crowdfunding Regulation applies from today, 10 November 2021, to providers of two key types of crowdfunding:
- investment-based crowdfunding, and
- peer-to-peer lending.
The new framework consists of an EU Crowdfunding Regulation together with related amendments to MiFID II. The changes to MiFID II (to exclude legal persons authorised as crowdfunding service providers (CSPs) under the EU Crowdfunding Regulation from the scope of MiFID II) were transposed into Irish law in April 2021 (see here). The EU Crowdfunding Regulation is directly applicable across the EU.
The new framework requires in-scope CSPs to be authorised, imposes operational requirements on those CSPs and introduces investor protection measures (which will differ depending on whether an investor is ‘sophisticated’ or ‘non-sophisticated’). Authorised CSPs will be able to provide in-scope crowdfunding services on a passported basis throughout the EU.
WHAT HAPPENS NEXT?
We expect to see details of the authorisation process from the Central Bank of Ireland shortly. Importantly, there is a transitional period: in-scope CSPs that are already engaged in activities that require authorisation under the new framework can continue to engage in those activities on a transitional basis until 10 November 2022, following which they will only be able to engage in those activities if they have been authorised to do so by their NCA.
At EU level, both ESMA and the European Banking Authority are required to prepare a number of technical standards under the EU Crowdfunding Regulation. ESMA wrote to the European Commission in July, requesting that the application date of the EU Crowdfunding Regulation be delayed given that the deadlines for many of the technical standards to be submitted for review are either the same as the application date (10 November 2021) or post-date the application date. ESMA also drew the Commission's attention to a number of interpretation issues in the EU Crowdfunding Regulation, and asked that the Commission clarify those points. The application date was not moved out, and no formal interpretive guidance has been issued by the Commission yet.
We are continuing to monitor developments and will publish updates as further developments occur.
Our Financial Regulation Group has extensive experience of advising on licensing perimeter issues and on licensing applications to the Central Bank of Ireland for a wide range of regulated firms, and would be very happy to assist with queries in relation to the scope of the new regime and the licensing process.