Introducing a New Legislation that clears the way for Malta to Provide Crowdfunding Services on a Cross-Border Basis – The Malta Financial Services Authority (the ‘MFSA’)

The MFSA has recently introduced a new application to license Crowdfunding Service Providers.

This new development is part of the economic policy initiatives presented by the European Union’s Capital Markets Union. This new application means that European Crowdfunding Service Providers can now provide crowdfunding services on a cross-border basis throughout the EU without requiring authorisation in each Member State.

The Crowdfunding platforms must go through an application process to get authorised via the competent national Authority in their EU Member State. The Regulation on Crowdfunding defines uniform rules across the EU for investment-based and lending-based crowdfunding services related to business financing. These will include innovative start-ups and small to medium enterprises that find it difficult to access funds via traditional means such as loans or through the capital markets. These methods can also prove to be a costly exercise as well and time-consuming.

Crowdfunding service providers enable such parties to connect to and raise funds from multiple investors using digital platforms.

The MFSA’s Head of Securities and Markets Supervision stated the following “In many respects, this is a very welcome development for the sector, bringing about much-needed clarity. This new legislation benefits the businesses that need to raise funds, the investors, through appropriate safeguards for consumer protection and ultimately stimulates the wider economy. It also facilitates the cross-border provision of crowdfunding services in the EU, which has been one of the biggest hurdles faced by crowdfunding platforms, leading to high compliance and operational costs. We believe that Malta is well placed to host such platforms, being a jurisdiction which is predominantly composed of SMEs and inclined towards FinTech driven entities”.

Important to note that the new Crowdfunding Regulation only applies to investment-based and lending-based crowdfunding services. Other types of crowdfunding, such as reward and donation-based crowdfunding, do not fall within the scope of this legislation.

For further information, contact our Business Development team at Zeta.