The design of financial return-based crowdfunding at EU level : a research based on the information asymmetry risk, existing regulations and Capital Markets Union plans

The financial return-based (loan-based and equity-based) crowdfunding market – as part of alternative financing – is growing significantly in European Member States. This study shows, by means of an extensive literature review, that there is no consensus in the scientific community about the definitions yet, and therefore proposes several definitions. Additionally, the study shows, by means of a case study consisting of 18 interviews, that the rights of money-lenders in crowdfunding are limited, but these rights can be increased through reducing the information asymmetry which exists between the money-lender and the fundraiser. To do so, a transparency balance and a level-playing field need to be developed. It is shown to be a private and public sectors’ cooperation in which the focus is laid on risk awareness and understanding (short-term/nascent market) and developing a regulatory framework (long-term/mature market). The approach to regulation development should be lean and flexible, so that European regulators can take into account the modular character of financial return-based crowdfunding. Finally, if the European Union takes its responsibility to develop uniform regulation, the European financial return-based crowdfunding market may become mature and free flow of capital across the European Union may finally become real.