On 10 November 2021 EU Regulation 2020/1503 comes into force, bringing substantial changes to the crowdfunding sector by ensuring application of single market principles.
Crowdfunding and crowdfunding platforms are a trending financial sector niche which had remained relatively untouched by EU regulatory efforts. But this will change from 10 November 2021 with the coming into force of Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937 (Regulation).
To date, 15 crowdfunding platform operators are authorised (included in the register) to act in Lithuania. This reflects not only the number of local crowdfunding platform operators, but also the total number of local market participants. This is due to the legal requirement for crowdfunding platform operators to have a registered seat (essentially be incorporated) in Lithuania. With implementation of the Regulation this will change: Member States will not require crowdfunding service providers that provide crowdfunding services on a cross-border basis to have a physical presence in the territory of a Member State other than the one in which those crowdfunding service providers are authorised.
These changes in the regulatory environment will open the Lithuanian market to a wider variety and spectrum of crowdfunding services as well as open possibilities for operators already registered to expand their business in other markets on a cross-border basis.
The Regulation does not provide for automatic recognition of national authorisations but establishes an interim period during which crowdfunding service providers may continue in accordance with existing national legislation.
In addition, the Regulation allows Member States to apply simplified authorisation procedures to entities that are authorised under national law to provide crowdfunding services at the time of entry into force of the Regulation. In these procedures, the competent authority (the Bank of Lithuania) ensures that the requirements laid down in the Regulation are complied with before granting authorisation pursuant to the simplified procedures. Crowdfunding providers based in Lithuania are unlikely to face significant challenges in this „re-authorisation” process, as the current national requirements are compatible with, and in some cases even stricter than, the Regulation (e.g., prudential requirements in national law start at EUR 40,000, whereas the Regulation sets a threshold of EUR 25,000).
The timeframe before 10 November 2021 is a perfect opportunity for existing authorisation holders to prepare for their entry to the international market, and for new ones to obtain national authorisation now and benefit from simplified transition to EU authorisation.
Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937