A “shake-out” of the EU peer-to-peer lending and crowdfunding space is being predicted after new regulations went live last month.
The Regulation on European Crowdfunding Service Providers (ECSP) creates a harmonised regulatory framework, meaning that authorised crowdfunding platforms in the bloc can easily passport into other EU member states.
There is a €5m (£4.5m) limit on how much can be raised for an individual loan on a platform over 12 months. Firms will need to comply with anti-money laundering regulations and be transparent about returns and interested parties.
Similar to UK regulations, investors will have to complete an appropriateness test to check they understand the risks.
The rules go slightly further than the UK and will give non-sophisticated investors a “reflection period” during which they can change their minds about an investment and get their money back.
Firms have 12 months to apply for licences to be compliant with the new laws.
Christin Friedrich, chair of the non-executive board at EuroCrowd, said firms shouldn’t delay applying for a new licence.
“Time to apply will be shorter as the process of granting a licence may take three or more months in some member states,” Friedrich said.
“Most likely, a number of platforms will stop their operations in the next 12 months and others will need to adjust their business model and infrastructure.
“But a number of platforms are already set up in relative alignment with the new rules and will be able to acquire the new licence more quickly. This will likely cause a shake-out in the industry, but also create exciting opportunities for growth and professionalisation.”