International Scientific Conference "New Challenges in Economic and Business Development – 2023: Recovery and Resilience" : Proceedings

Abstract

The past decade, the crowdfunding market was growing rapidly in the European Union, including Latvia. At the same time, crowdfunding had remained unregulated domain until the European Union Regulation on European crowdfunding service providers for business (henceforth -the Regulation) was passed in October, 2020, giving the Member States one year for its adoption, and additional one year for crowdfunding service providers for authorising under the Regulation. Nevertheless, by the end of 2022, there was only one licensed crowdfunding service provider managed by Latvian legal entity. Considering this, the goal of the study is to explore why the majority of existing crowdfunding platforms, managed by legal entities registered in Latvia, has not authorised itself under the Regulation. To achieve the goal, the methodology of the study combines in-depth analysis of the Regulation with an explanatory case study of crowdfunding platforms managed by Latvian legal entities. Having considered nine platforms managed by Latvian legal entities, the results of the study show that four biggest Latvian platforms have authorized themselves as investment firms. Among other platforms which are unlicensed for the time being, there could be only one potential candidate to extend the list of crowdfunding service providers authorised under the Regulation. The conclusion was made considering the business models of the providers, and presence or absence of an auto-investing function, which was restricted by the Regulation. An implication of the obtained results is the possibility that the research will serve as a base for future studies on the Regulation's effect on the European crowdfunding industry.