Impact of regulation on investment crowdfunding
Impact of regulation on investment crowdfunding

Summary/Abstract: This article focuses on the regulation of investment crowdfunding as a key criterion for thedynamic but safe development of this form of business financing. The aim of this article is to analyse the existing regulatory framework in developed market economies, such as the UK andthe US, which are the leaders in the alternative finance market, and to try to assess whether thepan-European equity crowdfunding regulations that are being introduced have a chance of enablingthe European equity crowdfunding market to emerge. Crowdfunding, and in particular investmentcrowdfunding, is a relatively new form of alternative financing for business activities, which can and– in its mature form – does provide an important source of funding that ‘fills the gap’ in early-stagefinancing for start-ups, innovative projects and is also a source of financing for SMEs. The intensive,uncontrolled development of innovation in financial markets generally leads to irregularities (fraud,abuse, and crises). In turn, excessive and restrictive regulation can act as a brake on the developmentof financial innovation. Until 2023, crowdfunding in EU countries will be regulated only by nationallaws, most of which are not specific to this form of financing. The fragmentation of the Europeanmarket and the inconsistency of regulations have led to a slowdown in the development of this formof financing, resulting in a loss of development potential for companies and entire economies. Theauthors present the equity crowdfunding regulations of the US and the UK – the world’s number1 and 2 crowdfunding markets – as a benchmark for the proposed pan-European regulations. Thefeatures of the common European rules seem to meet the requirements. And the increase of thefunding amount to EUR 5 million opens up completely new possibilities for equity crowdfunding.

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