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Capital Markets Union: Crowdfunding, FinTech and Sustainability

As part of its efforts to build a Capital Markets Union the Commission presented a new series of actions that aim to connect finance with the specific needs of the European economy and to enable the financial sector to make use of the rapid advances in new technologies.

Action Plan on sustainable finance

As our planet increasingly faces the unpredictable consequences of climate change and resource depletion, urgent action is needed to adapt to a more sustainable model. Around €180 billion of additional investments a year are needed to achieve the EU’s 2030 targets agreed in Paris, including a 40% cut in greenhouse gas emissions. This is why, on the basis of the recommendations set out by the High-Level Expert Group on sustainable finance, the Commission is today setting out a roadmap to boost the role of finance in achieving a well-performing economy that delivers on environmental and social goals as well.

The Action Plan presented by the Commission has three objectives:

  • re-orient capital flows towards sustainable investment, in order to achieve sustainable and inclusive growth;
  • manage financial risks stemming from climate change, natural disasters, environmental degradation and social issues; and
  • foster transparency and long-terms in financial and economic activity

Today’s Action Plan includes a series of upcoming key actions covering all actors in the financial system.

Action Plan on Financial Technology

The European Commission also unveiled an Action Plan on how to harness the opportunities presented by technology-enabled innovation in financial services (FinTech).

The Action Plan envisages to enable the financial sector to make use of the rapid advances in new technologies, such as blockchain, artificial intelligence and cloud services. At the same time, it seeks to make markets safer and easier to access for new players. This will benefit consumers, investors, banks and new market players alike. In addition, the Commission is proposing a pan-European label for platforms, so that a platform licensed in one country can operate across the EU.

The Action Plan sets out 23 steps to enable innovative business models to scale up, support the uptake of new technologies, increase cybersecurity and the integrity of the financial system.

Legislative proposal on crowdfunding

The Commission also put forward new rules that will help crowdfunding platforms to grow across the EU’s single market.

Crowdfunding improves access to funding especially for start-ups and other small businesses. A startup can present its project on an online platform and call for support in the form of a loan (‘peer-to-peer lending’) or equity. Investors receive a financial return for their investment. It is currently difficult for many platforms to expand into other EU countries. This is why crowdfunding in the EU is underdeveloped as compared to other major world economies, and the EU market is fragmented.

Today’s proposal will make it easier for these platforms to offer their services EU-wide and improve access to this innovative form of finance for businesses in need of funding. Once adopted by the European Parliament and the Council, the proposed Regulation will allow platforms to apply for an EU label based on a single set of rules. This will enable them to offer their services across the EU. Investors on crowdfunding platforms will be protected by clear rules on information disclosures, rules on governance and risk management and a coherent approach to supervision.