New rules providing the first EU-wide regulation of the crowdfunding sector have been approved today by MEPs. Led through the European Parliament by ECR MEP Ashley Fox, the legislation introduces common regulations and standards that crowdfunding service providers (CSPs) can opt into. Currently, separate national rules limit cross-border activity.

It also creates a European passport for CSPs, providing protection for both investors and those seeking to raise finance.

Mr Fox said: “Crowdfunding is becoming an important source of funding for small businesses and micro-enterprises across the EU.

This legislation is big step towards helping achieve its full potential.” Different levels of regulation will apply to platforms depending on the complexity of their operations. Service providers will be required to give clients clear information about the risks of their investments and there are provisions to address conflicts of interest and complaints.

National authorities remain responsible for authorising and supervising CSPs, with the European Securities and Markets Authority assuming a mediation role. Although not included in today’s report, MEPs have asked ask the European Commission to come forward with new legislative proposals on the regulation of initial coin offerings – a type of crowdfunding which often involves cryptocurrencies.

Mr Fox said: “Approval today means that negotiations with European Council and Commission can begin after the European elections in May, with the aim of the legislative process being completed by the end of the year.”

The crowdfunding regulation is the first to emerge from the European Commission’s Action Plan, aimed at harnessing technological innovation in financial services.