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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
Crowdfunding, crowdinvesting, and crowdlending platforms continue to gain popularity in Germany, supported by growing investor interest and innovative digital solutions such as mobile apps. While regulatory requirements remain strict, the market is steadily expanding as more individuals seek alternative investment and financing options. The Covid-19 pandemic accelerated awareness and adoption, and ongoing regulatory harmonization at the European level is expected to further facilitate growth and cross-border opportunities in this sector. Overall, crowdfunding and related platforms are becoming an increasingly important part of Germany’s financial ecosystem.
Legal affairs
Obligations and requirements to provide crowdfunding, crowdinvesting and crowdlending platforms described above
Crowdinvesting and crowdlending platforms are potentially subject to a license requirement according to German Banking Act (Kreditwesengesetz – KWG), German Commercial Code (Gewerbeordnung – GewO) or German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz – ZAG). Furthermore, in 2020 the EU introduced Regulation (EU) 2020/1503 on European crowdfunding service providers for business (European Crowdfunding Service Provider Regulation – ECSPR). Additionally, anti-money laundering and data protection regulations are to be complied with.
The required licence depends on the exact business model. License costs depend on the specific business model and result from fixed and time spent costs. Fixed costs are up to EUR 13,523.00 and additional time spent costs depend on the complexity of respective business model.
Among other things, particularly sufficient initial capital consisting of Common Equity Tier 1 capital (CET1) available in Germany is required to obtain a license. The amount of required CET1 is subject to a case-by-case assessment. For institutions offering both lending and deposit business, the required initial capital is EUR 5m.
When offering banking services, the service providers are to comply with requirements for the initial capital as well as with the funds requirements at all times. According to Art. 92 Regulation (EU) No. 575/2013 (Capital Requirements Regulation – CRR