Europe may have one of the world’s most robust alternative lending markets, but regulators have begun to explore how to regulate the industry. The challenge, experts say, is how authorities can protect investors and borrowers without limiting the positive impact of the alternative finance sector.
In Germany, officials revealed last April that they will roll out new rules to place restrictions on who can invest through crowdfunding platforms, as well as how much money startups and SMEs can borrow.
The regulations are meant to protect the players involved in the crowdfunding process. But according to alternative lenders in the nation, they will unfairly restrict the market and discourage investment.
Reports in the Financial Times said Monday (June 22) that crowdfunding platforms are now challenging the impending rules.
Germany-based lending marketplace Lendico is one of those challengers. “We want to make this asset class accessible to the public,” said Lendico cofounder Dominik Steinkühler in an interview. “If there are more intermediate steps, it’s more of a nuisance.”
Those intermediate steps include new requirements, set to come into effect next month, that make investors submit a statement to federal authorities if they wish to invest more than €1,000 ($1,127) through a crowdfunding platform. According to reports, investors will only be able to invest more than this cap if they can prove they have more than €100,000 in liquid assets, or a monthly income of more than twice the amount they would like to invest.
Small business crowdfunder Zencap is similarly against the new rules. “Regulation will help us in a young industry to keep the black sheep out, but we don’t like regulation that puts unnecessary [limits] on people who want to invest with us and know the risk,” said Zencap Managing Director Christian Grobe.
Germany is Europe’s third-largest alternative lending market, reports said.