CROWDFUNDING IN THE EU - CHALLENGES OF THE INNOVATIVE SOURCE OF FINANCING

Crowdfunding is a new, attractive and innovative source of financing for SME's. Although there is no established international definition, it typically refers to open calls for financing, often over internet. Monetary investors are rewarded with a product, symbolic reward, investment or lending. Calls for investment, typically called crowdfunding campaigns, can be used for various types of projects - SME's, start-ups, artistic project, creation of a specific product by an already established company, or other. It allows for an easy and quick fundraising option for investment seeker, and the same for investor, thus broadening the range of possible investors and greatly simplifying the investment. The average amount of funds raised through crowdfunding is estimated to be at EUR 1.5 billion in 2014., thus reaching a 116% annual growth between 2013 and 2014. However, due to the recent prominence of such campaigns, they remain largely unregulated in most countries of the EU, and thus present certain risks for the investors. Starting with the European parliament resolution of 9 July 2015 on Building a Capital Markets Union (2015/2634(RSP) and continuing with the Action Plan on building a Capital Markets Union, EU has given special attention to the crowdfunding, with a view on regulating and promoting use of this innovative financial instrument. This paper will analyze risks inherent to crowdfunding, provide analysis of the regulating tools on crowdfunding currently in effect in the EU, challenges to the cross-border funding and use comparative analysis of the USA and EU market to predict possible future regulation and thus future for the crowdfunding.