Crowdfunding is being talked up as part of the Fintech ‘revolution’ - the disintermediation of finance by ever-greater use of technology, and as a way to, at last, provide enough financing for SMEs and early-stage businesses in the economy. As with all investments, crowdfunding also entails a number of risks (such as project and liquidity risks, platform failure and cyber-attack) and concerns (for instance, investors’ inexperience, reliability of the investment, undisclosed conflicts of interest, etc.). Regulators must therefore strike a sensible balance - creating a supportive space for innovation, while maintaining a robust regulatory framework. This chapter considers the rationale for the regulation of crowdfunding and examines the regulatory approaches to crowdfunding platforms, focusing on such key issues as the type of authorisations required for the operation of crowdfunding platforms, investor disclosures, risk warnings, due diligence/pre-funding checks and platforms’ governance requirements. Undoubtedly, regulation will need to evolve, as crowdfunding continues to develop and include new forms such as initial coin offerings and securities token offerings. Nevertheless, with appropriate regulatory safeguards concerning investor protection, crowdfunding can be an important source of non-bank financing in support of economic growth.
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