Crowdfunding is basically an alternative to more traditional fundraising methods offered by banks or institutional investors, allowing anyone to raise small amounts of cash from myriad sources. However, different countries have different rules, while different kinds of crowdfunding (e.g. equity-, lending-based) are often treated differently in terms of which regulations apply — and this brings all manner of complexity to an industry that pretty much relies on an international medium (the internet) to function.
This has been most-evident in the EU, which historically has regulated crowdfunding platforms on a local country level, making it trickier for cross-border crowdfunding campaigns owing to the fact that each platform would require regulatory approval for each country they wish to operate in.
And that, effectively, is what the European Crowdfunding Service Provider Regulation (ECSPR) for business seeks to address — it combines disparate and siloed rules together under a single framework which all business-focused crowdfunding platforms must adhere to. One authoriziation to rule them all, is the general idea, with fewer hurdles to operate across all 27 EU states. And for investors, it means they that they only have to worry about a single protection framework.
“For many years, one of the biggest hurdles faced by crowdfunding platforms seeking to offer their services across borders has been diverging licensing requirements and the lack of common rules across the European Union,” the European Commission notes. “This has resulted in high compliance and operational costs, which prevented crowdfunding platforms from efficiently scaling the provision of their services.