On October 30, 2017, the European Commission published an inception impact assessment for a legislative proposal for an EU framework on crowd and peer-to-peer finance.

In the impact assessment, the Commission sets out information on a potential initiative relating to crowdfunding. The aim of the initiative is to create a framework that will encourage cross-border activity relating to crowdfunding platforms and to provide platforms with a proportionate and effective risk management framework. The Commission is concerned that, to date, crowdfunding activities have been confined to national markets with very little cross-border activity. It is also concerned about the perceived lack of reliability of crowdfunding and peer-to-peer platforms, with the biggest perceived risks being loan defaults, business failures, fraudulent activities and the collapse of platforms because of malpractice.

The Commission sets out three potential options for an EU framework on crowdfunding:

• A self-regulatory approach with minimum EU standards. Under this option, the Commission would map best practices and local regulatory regimes with the aim of recommending a set of non-binding minimum standards and industry best practices.
• A comprehensive EU framework. Under this option, the framework would consist of a specific crowdfunding license under the passporting framework, allowing platforms to operate across the single market. Crowdfunding platforms would be subject to proportionate governance and transparency requirements. The Commission envisages that crowdfunding platforms would be subject to a similar regulatory regime as regulated trading venues or payment institutions. The framework might be established through stand-alone legislation or through amendments to existing financial services legislation.
• A stand-alone opt-in EU framework. Under this option, the Commission would create an EU framework for crowdfunding platforms that platforms wishing to conduct cross-border activity could opt into, with other platforms subject to national law. This framework would also involve a passport and governance and transparency requirements.

If the Commission decides that no EU framework is needed, it envisages that it will maintain regular dialogue with the European Supervisory Authorities (ESAs), member states and the crowdfunding sector to promote convergence and the sharing of best practices.

The Commission indicates that the next steps for this initiative will take place in the first quarter of 2018.