Stronger Regulation Needed for the Crowdfunding Market

The international crowdfunding market has seen incredible growth over the last seven years. In fact, in 2010 the overall funding raised via this method hadn’t even hit the $1 billion mark, and in the seven years between then and 2017 we have seen around $50 billion invested in the global crowdfunding market. It is the debt-based method of crowdfunding, where investors expect to see a financial return on their investment, that has dominated the growth in funding, raising over 80% of this overall $50 billion since 2010.

Though the market has seen remarkable growth it has slowed down slightly over the last year or so. However, this specific method of funding has still garnered great political and economic attention globally. In fact, a reason that this could be the case is due to the fact that the market is completely dominated by two parties; the US and the EU, who have raised $25.8 billion and $16.9 billion respectively, of the $50 billion between 2010 – 2017.

Though the EU does have a large share of the crowdfunding market, there is an issue. When the EU’s crowdfunding market is broken down country per country, it is clear that the UK completely dominates the EU market, with 88% of the funds raised between 2010-2017 coming through the UK. This is, of course, not the best news for the EU, with the UK expected to leave the bloc in October 2019, meaning the EU will lose a huge share of the crowdfunding market.

Of course, there may be arguments that suggest that if the UK loses its strong collaboration with the rest of the EU, then there may be less investment and therefore crowdfunding in the UK. However, crowdfunding typically is a local source of finance, with most investors funding ventures in the same country they are located due to the fact that they have much more knowledge on the political, economic and legal situation. Therefore, the UK leaving the EU is likely to not have a huge effect on the level of crowdfunding market share that the UK has, but will hugely, and potential detrimentally, impact the EU’s collective market share. Therefore, with Brexit likely to happen in October 2019, it is important for the EU that they look at ways to discourage the localisation of crowdfunding, and encourage more cross-border activity.

For more on this story, click here.

Sourced from The Financial