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FinTechs belonging to this category operate crowdfunding, crowdinvesting and crowdlending platforms on which money is raised to invest in various projects, mainly start-up companies and real estate projects.
Crowdfunding is not a defined financial service, but generally used to describe donation-based crowdfunding (the investor donates the money to the project), reward-based crowdfunding (the investor receives an often symbolic consideration for his investment), equity-based crowdfunding (crowdinvesting: the investor participates in the profits of the financed project or acquires shares or debt instruments) or lending-based crowdfunding (crowdlending: the investor is reimbursed at the end of the project with or without interest).
Introduction
Attitude of the country towards crowdfunding, crowdinvesting and crowdlending platforms
There is a growing tendency for start-ups to raise money privately rather than apply for traditional bank loans to fund their businesses. The reason for this is that small and medium-sized businesses find it difficult to access loan capital from financial institutions, given the need to prove solvency, a good business plan and a strategy for business development. Crowdfunding, crowdinvesting and crowdlending are not very popular in Bulgaria but there is a growing tendency for start-ups to rely on these alternative ways of fundraising as they help creators complete their projects by attracting investors.
Legal affairs
Obligations and requirements to provide crowdfunding, crowdinvesting and crowdlending platforms described above
The national regime adopts the European legal framework. The Bulgarian act introducing crowdfunding is the Act on Public Offering of Securities (POSA). POSA manages to implement most of the key provisions of Regulation (EU) 2020/1503. Some of the Regulations’ mechanisms and measures regarding investor protection are not explicitly named in POSA but they are still directly applicable and, in addition, pursuant to Article 179 of POSA, the Financial Supervision Commission (FSC) may lay down additional requirements in this regard.
According to POSA, a license is required in order to provide crowdfunding services. This license is issued by the Financial Supervision Commission and the licensing price is BGN 7 200 (appx. EUR 3700). In addition, there are obligations for crowdfunding service providers relating to investor protection.
It is important to note that a license to provide crowdfunding services is not equivalent to a license to also provide payment services. If a provider of crowdfunding services also provides payment services in connection with their crowdfunding services, they must also be a licensed payment service provider within the meaning of the Payment Services and Payment Systems Act.
Additional comments regarding the legal situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area