New regulatory framework for Crowdfunding Service Providers

The EU Regulation on Crowdfunding Service Providers regulating their functioning and activities entered into force on 10 November 2021 and implies specific licensing requirements at Luxembourg level.

Crowdfunding is a form of financing increasingly used by start-ups and small and medium-sized enterprises, typically relying on small investments. Over the past few years, several crowdfunding models have emerged within the European Union. Only some forms are currently covered by financial sector regulation.

Regulation (EU) 2020/1503 of 7 October 2020 on European Crowdfunding Service Providers for business (“Regulation”) is directly applicable in all Member States since 10 November 2021. It promotes and regulates the use of financial intermediation where a crowdfunding service provider, without taking on own risk, operates a digital platform open to the public in order to match or facilitate the matching of prospective investors or lenders with businesses that seek funding, the type of crowdfunding that the EU wants to foster.

The new legal status of European Crowdfunding Service Providers ("ECSP") allows relevant players to benefit from an EU passport, based on a single set of rules. Since 10 November 2021, the provision of crowdfunding services in the EU has been subject to a licence from and supervision by a Member State competent authority. For the provision of crowdfunding services from Luxembourg, a licence needs to be obtained from the CSSF.

As the CSSF further sets out on its webpage dedicated to crowdfunding, 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 12 months per project owner.

Investors on crowdfunding platforms will benefit from a strengthened protection regime based on clear rules on 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.

The CSSF underlines that ECSPs intending to provide payment services in addition to crowdfunding services, may need to obtain a separate licence under the amended Law of 10 November 2009 on payment services.

Finally, Bill of Law 7825 (see link here  – available in French only) implementing the Regulation and detailing the CSSF's powers with respect to ECSPs is finalised and should be submitted to a vote in Parliament soon.