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Alternative Finance in France | European Parliament Drafts ICO Regulation Proposal

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In this edition I focus on some international ICO/Blockchain developments and the need for cross-bord
 

Alternative Finance Trends

August 27 · Issue #8 · View online
Alternative Finance is growing rapidly and takes its place in the financial system. What are the latest trends and how will the financial eco-system develop in the next 10 years?

From P2P-lending to ICOs and from crowdfunding to marketplace lending I will provide a weekly overview of the most important news. Every week I will ask an expert to provide in-depth insights of local developments and challenges in their country.

In this edition I focus on some international ICO/Blockchain developments and the need for cross-border collaboration for regulators and policy-makers.
This week we will also focus on the Status of Alternative Finance in France with Florence de Maupeou
Main news items:
  • European Parliament Drafts ICO Regulation Proposal
  • 12 regulators (incl FCA) are collaborating on global sandbox
  • World Bank Launches World-First Blockchain Bond
  • Standard disclosure template for SME alternative finance
Feedback on this edition or ideas of articles to share in this newsletter? Just send a reply on this newsletter or email me at ronald@kleverlaan.com.
Ronald
PS. Is this newsletter forwarded to you? You can subscribe here.


European Parliament Drafts ICO Regulation Proposal European Parliament Drafts ICO Regulation Proposal
12 regulators (incl FCA) are collaborating on global sandbox 12 regulators (incl FCA) are collaborating on global sandbox
World Bank Launches World-First Blockchain Bond
EU2018AT
Austria’s Minister of Finance, Hartwig Löger, has put the topic of “crypto” on top of the #ecofin agenda during #eu2018at. According to him, Europe currently lacks uniform rules for the handling and trading of crypto assets: https://t.co/6wPXa3pBWz
9:55 AM - 8 Sep 2018
Standard disclosure template for SME alternative finance
Expert of the week : Florence de Maupeou (France)
What is the current status of Alternative Finance?
Equity crowdfunding now open for all startups in Australia
France is the biggest market in the Continental Europe, with € 940 million collected by the alternative finance actors in 2017. A 50% increase compare to 2016.
  • €336 million for the crowdfunding sector (reward crowdfunding, crowdlending and crowdinvesting)
  • €231 million for peer-to-peer consumer lending platforms
  • €215 million for online lending funds
  • €155 million for personal fundraising and group gifting website
  • €3 million for check-out donations and payroll giving
Click on the graph to access to the all report.
The first years, the volume raised on platforms showed growth rates superior to 100%. This slowing down from the activity since the last two years can be explain by a certain maturity of the sector. In 2017, the lending part was the more dynamic with an increase of 102% and a collect of 195,4 million of Euros upon the 336 million collected by crowdfunding platforms.
The business lending shows an important increase due to a relatively recent birth. Indeed, crowdlending due to the existence of a banking monopoly was not possible without a bank agreement until October 2014.
Click on the graph to access to the all report.
A diversity of alternative platforms emerged in France, creating a wide spectrum of innovation in the finance sector. We observe an important diversification of the sectors financed by alternative finance. Back in 2010, the cultural and social sectors were the prevailing sectors in crowdfunding industry. Now, the economic projects take the first position. Especially the real estate sector, which gathered almost 110 million of Euros, followed by the local shop and services with 57 million of Euros and by environmental projects and renewable energy with a collect of 31 million of Euros. We also observe the apparition of the agricultural sector.
Click on the graph to access to the all report.
The number of crowdfunding platforms is also significant. France lists about 170 platforms, including group gifting website, donation or reward crowdfunding, business crowdlending, crowd investing, royalties crowdfunding, real estate crowdfunding …
Pioneer in crowdfunding regulation
France has been a pioneer in the setting up of a crowdfunding regulation. Through the impulsion of the French crowdfunding association the government created two statutes in October 2014 :
The crowdfunding intermediary (in french Intermédiaire en Financement Participatif (IFP)), supervised by the “Autorité de contrôle prudentiel et de résolution” (ACPR), for lending platforms and donation platforms or rewards-based crowdfunding. 120 IFPs are listed in the Orias register, the single register for intermediaries in insurance, bank and finance.
The Participating Investment Advisor (in french Conseiller en Investissements Participatifs (CIP)), supervised by the Authority of financial markets (AMF), for the platforms intermediating specific financial instruments and minibons. Some 50 CIPs are listed in the Orias register.
Can you give us an inspiring case from your country?
Financement Participatif France (FPF) is the representative professional association of the French crowdfunding sector. Created in August 2012, it now gathers 150 members, including 70 platforms of all crowdfunding categories. One of the project implemented within its self-regulation mission was the creation of a common table, readily-accessible on crowdlending websites. This table boasts the data reflecting bad debt rates and returns performance according to a methodology defined by FPF. It allows a comparison between the different platforms and more transparency of the sector.
Another good practice is the creation of a label, initiated by FPF with the French Ministry for the Ecological and Inclusive Transition : a “Crowdfunding for Green Growth” label to promote projects which contribute to the ecological and energy transition. By allowing to qualify the crowdfunding projects, the Label will help shift funding towards low-carbon economy. To receive this label a project must meet several criteria: eligibility, transparency of information and proof of its positive impacts. The project must, therefore, be involved in green and be subject to transparent information practice internally and document its environmental and social impacts. The label is granted by the platforms that have been allowed by the label governance body.
"Mini Green Power" is an example of crowdfunding project for Green Growth label. His aim it's to create a local production of green energy. Click on the picture to access the website.
Finally, France is the first state to have taken the initiative to include blockchain (distributed ledger technology) in the regulation. Some experimentations are running, as the one launched by the “Caisse des Dépôts” and FPF to create an open blockchain for the emission of minibons. The objective will be to create and facilitate a second market for crowdfunding.
What are the biggest obstacles for growth?
The alternative finance knows a great dynamic in France but it evolves in a framework characterized by a lack of flexibility regarding the regulators that can be reluctant to adapt the rules to a digital business; and the uncertainty of the crowdfunding platforms’ business models.
Most of the actors find the existing regulation appropriate for their activity regarding the 3rd European alternative finance industry report – Expanding horizons – published by the Cambridge Centre for Alternative Finance. Moreover, between 20 and 30% of the respondents answered that is excessive and too strict. 
Click on the graph to access to the all report (page 57 to 61 for France)
Indeed, while the French regulatory framework is particularly and rightly provided with regard to advice and information for investors, it takes insufficient account of the specific characteristics of an activity operating through an internet platform (customer relationships carried out exclusively through digital channels, very significant number of investor clients for small individual amounts, …) and slow down the operating processes of the crowdfunding platforms.
Furthermore, in order to strengthen their business models based on applying relatively low margins to large collection volumes, the French crowdfunding platforms are looking to the European market to extend their activities. But the cost and the time it takes to adapt to the local regulation is significant.
Therefore, French crowdfunding sector supports and encourages the implementation of a harmonized European regulation of crowdfunding. But the proposition published by the European commission – with a threshold of 1 million of Euros where in France project owner can collect up to 2,5 million of Euros, and perhaps tomorrow 8 million – is far from being satisfying for French actors.
Current State of Alternative Finance in Europe
Albania | Armenia | Austria | Belarus | Belgium | Bosnia & Herzegovina | Bulgaria | Croatia | Cyprus | Czech Republic | Denmark | Estonia | Finland | France | Georgia | Germany | Greece | Hungary | Iceland | Ireland | Italy | Latvia | Lithuania | Luxembourg | Macedonia | Malta | Moldova | Monaco | Montenegro | Netherlands | Norway | Poland | Portugal | Romania | Russia | Serbia | Slovakia | Slovenia | Spain | Sweden | Switzerland | Turkey | UK | Ukraine
Contact
Do you have any questions regarding (trends in) alternative finance, don’t hesitate to contact me by replying on this newsletter.
This newsletter is part of the Altfinator project en supported by the European Commission to promote alternative finance in Europe.
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