In 2020, the EU’s European Crowdfunding Service Providers Regulation (“ECSP”) Regulation (EU) 2020/1503 entered into force, providing a harmonised regulatory framework throughout the EU for the provision of crowdfunding services. This harmonised framework has also made it easier for authorised Crowdfunding Service Providers ("CfSP") to passport their crowdfunding services across the EU, since it eliminated the different legal regimes impeding cross-border services. The relative legislation in Malta is the Crowdfunding Services Providers Act (Chap 637 of the Laws of Malta) with a set of Crowdfunding Rules issued in January 2022, which regulations obliges Crowdfunding Service Providers to differentiate between sophisticated investors and non-sophisticated investors, offering higher protection to the latter.
Investment-Based Crowdfunding services consist of the placing, without a firm commitment basis, of transferable securities (such as shares and bonds) and admitted instruments for crowdfunding purposes. In this case, investors invest in a project by generally receiving shares in the company of the proposed project.
Lending-Based Crowdfunding services consist of the facilitation of granting of loans to crowdfunded projects. Lending-Based Crowdfunding is essentially an agreement between the investor and the project owner, whereby the former makes available to the latter an agreed amount of money and for an agreed period of time together at an agreed rate of interest.