Research project

Investigator:
Teresa Rodríguez de las Heras Ballell

Abstract:

The development of modern economies does critically depend on the existence and smooth functioning of the credit market. Access to credit and funding sources in reasonable conditions determine survival possibilities of projects, initiatives and businesses and delimit their growth opportunities. Recent periods of crisis and economic turmoil have appreciably debilitated the financing muscle in our economies. Accordingly, credit facilities have been dramatically limited. In such a context, the search for alternative-financing sources has become a priority need for social, business, research or cultural projects. Crowdfunding emerges as an encouraging alternative to traditional funding sources able to promote, boost and support a variety of projects.

Certainly, crowdfunding is not a new phenomenon, but due to the conjunction of economic climate, technological progress and social trends it has gained momentum in present times with a unique profile. It cannot be entirely explained as a mere emulation of existing financing models.

As long as crowdfunding has spread, mainly, in America and Europe and the number of funded projects, financing platforms and prospective contributors has rocketed, close attention has been paid by legislators, supervisors and regulators. The increasing volume and scope of the phenomenon has multiplied legal concerns. Not surprisingly, initiatives to regulate and/or supervise activity and participants in the crowdfunding sector have been undertaken in jurisdictions with most active crowdfunding markets.

Whereas the United States have adopted, in 2012, the Crowdfunding Act – Title III “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012” of Jumpstart Our Business Startups Act (JOBS Act) – to be further developed by the SEC, the European Union is still working on a regulatory model for crowdfunding in Europe. Some EU countries have enacted or are in process of adopting rules on crowdfunding (Italy, Spain, France, United Kingdom). Nevertheless, full harmonization on crowdfunding rules is encountering a number of obstacles. Therefore, an Expert Group called “European Crowdfunding Stakeholders Forum” (ECSF) has been set up in June 2014 to assist the European Commission in exploring the potential and the risks of this growing form of finance, as well as the national legal frameworks applicable to it, in order to identify whether there is value added in European level policy action in this field.

Within such a context, the aim of this project is two-fold. On the one hand, one aim is to produce a comparative analysis of crowdfunding rules in the EU and U.S., to identify similarities and differences, and to develop qualitative conclusions. A comparative approach to U.S./EU regulation processes may reveal differing views both in legal solutions and in procedural decisions. Such a comparative analysis might provide some helpful inputs to the process in the EU. On the other hand, as a natural result of the study of such existing and prospective regulations, a further aim is to discuss the main legal implications of crowdfunding for tech industries. The impact of crowdfunding on the tech sector is intense and multifaceted. Firstly, crowdfunding seems to be inspired by the philosophy of the growing “Shared Economy” and shares many of its founding concepts. Therefore, it represents a revolution in business models. Secondly, crowdfunding is fuelled by technology solutions and based on digital infrastructure. Thirdly, crowdfunding offers an alternative financing option particularly suitable for tech projects.