The Malta Financial Services Authority has launched a new public consultation on the rules regulating crowdfunding service providers ahead of their entry into force in October 2021.

The EU passed a Regulation in November 2020 aimed at fostering cross-border crowdfunding services by replacing the current system of several divergent pieces of domestic legislation with a European standard applicable to all Member States.

Crowdfunding services providers operate publicly accessible internet-based platforms that facilitate the funding of projects by raising capital from numerous investors who each contribute a relatively small investment.

In the circular announcing the consultation, the MFSA said that, “the EU market for crowdfunding is underdeveloped compared with other major world economies”.

“For many years, one of the biggest hurdles faced by crowdfunding platforms seeking to offer their services across borders has been the lack of common rules and diverging licensing requirements across the EU.”

It said that this has resulted in high compliance and operational costs, which prevented crowdfunding platforms from efficiently scaling the provision of their services.

The rules apply for projects requesting up to €5 million in funding, calculated on a yearly basis. Projects raising more than €5 million in funds fall under other financial services rules, an increase from the current local legislation which sets the limit at €1 million.

Reward and donation-based crowdfunding are explicitly excluded from the scope of the new rules.

The Regulation prohibits Member States from imposing additional requirements on crowdfunding service providers to ensure that compliance and operational costs are kept to a minimum, allowing both small businesses and investors more choice and certainty.

The Regulation aims to ensure a high level of investor protection across the Union by differentiating between sophisticated and non-sophisticated investors, with crowdfunding service providers obliged to run an appropriate entry test to gauge thier clients’ level of knowledge.

The MFSA says that the new law will “set clear rules on information disclosures for project owners and crowdfunding platforms”, strengthen “rules on governance and risk management for crowdfunding platforms”, and introduce “strong and harmonised supervisory powers for national authorities overseeing the functioning of crowdfunding platforms.”

The European Securities and Markets Authority will also establish a public and updated register of all crowdfunding service providers authorised in accordance with this Regulation.

The MFSA is inviting interested parties and potential stakeholders to submit their feedback on this Regulation via email to by not later than 5th April 2021.

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