Content area
Full Text
1.BACKGROUND
Crowdfunding appears to be a fairly recent development, closely linked to IT platforms and internet transactions. Nevertheless, the idea goes back to the 19th century, when, for example, the pedestal of the New York Statue of Liberty was financed in a crowdfunding-style newspaper campaign initiated by Joseph Pulitzer, through the collective donations of individuals whose names were published by a newspaper in return. That is exactly what would be called a reward-based crowdfunding transaction if the medium was an IT platform rather than a newspaper. So, one may say that the idea of crowdfunding has its roots in liberal traditions in the sense of an economy driven by free and mature citizens who do not necessarily have to rely on all-inclusive regulation. This is in line with the approach of national and international authorities who are hesitant to set up regulatory barriers against the development of innovative funding methods. The benefit of crowdfunding appreciated by regulators is that it provides funds for projects that are not normally tackled by banks or other professional financial institutions, at least not at reasonable prices, due to related risks or small size.
What are the reasons why institutions are considering regulation? Actually, crowdfunding is not restricted to charitable aspects. There are two commercial types-lending (commonly known as peer-to-peer lending) and investment-based crowdfunding-both providing functions normally reserved to strictly regulated institutions such as banks and investment firms. EU regulators have defined crowdfunding as ''a means of raising finance for projects from 'the crowd' often by means of an internet-based platform through which project owners 'pitch' their idea to potential backers, who are typically not professional investors."1 The relevant regulatory authorities are bank supervisors, as far as loan contracts, and securities regulators, as far as profit sharing and securities are involved.
In Europe, crowdfunding is still a medium-sized market segment.2 The UK has taken the lead with loan-based crowdfunding at almost GBP 1.3 billion and investment-based crowdfunding at GBP 84 million in new business in 2014.3 In the USA, maximum amounts in the range of USD170 million and 3,800 private investors for single office developments have been reached. The biggest market seems to be the People's Republic of China, estimated at some 23,100 lending platforms with RMB 82.5 billion...