European legislation forces crowdfunding platforms to take immediate action and make fundamental choices

Crowdfunding platforms that focus on the business market will face an additional challenge this year: on November 10, a new European regulation comes into effect that imposes various requirements on the organization. In the Netherlands existing platforms have until May 2023 to apply for a new license and we expect other European countries will maintain the same application timeframe. So in order to comply with the regulation before the deadline, action must be taken immediately and fundamental choices must be made.

The new regulation is intended to create a level playing field for crowdfunding service providers (CSPs) within the European market. The regulation also aims to increase investor protection and promote transparency. The regulation will provide benefits for both platforms and investors. But in addition, the regulation also brings serious organizational and operational requirements for CSPs. For example, there are requirements for a complaints procedure, a business continuity plan, financial management and the provision of payment services.

How do you set up payment services as a crowdfunding platform?

Meeting these requirements takes time and the licensing process alone can take several months, especially if many institutions wait until the last minute to apply. So if platforms do not want to avoid the risk of having to (temporarily) stop their crowdfunding services, they need to start in time and make clear choices. An important part of the application procedure is focused on the way you as a CSP have set up your payment services.

As a CSP, there are three options for continuing to offer payment services within their platform:

1. Apply for a licence exemption
2. Apply for a licence from the regulator
3. Outsourcing to platform-PSP

Each option has it’s pros and cons and specific additional requirements. In case you are currently active as a CSP and would like to know which option is best for your platform and how to ensure that your payment process complies with the new directive before the deadline?

Read the whitepaper ‘How to set up payments as a crowdfunding platform under the new european regulation?’