Crowdfunding service providers excluded from investment services legislation in Cyprus
On 29 April 2021, the Law amending the Investment Services and Activities and Regulated Markets Law 2021 (the Amendment Law) was published in the Official Gazette and came into effect.
The Amendment Law implements the EU Regulation 2020/1503 (the EU Crowdfunding Regulation) on European crowdfunding service providers for business in Cyprus.
Despite the fact that crowdfunding has been widely recognised as an established method of alternative finance, in the absence of a common regulatory regime at Union level, several Member States had introduced domestic legislation tailored to the needs of local markets, which led to rules on applicable requirements and scope of permitted activities to significantly vary across the board.
The EU Crowdfunding Regulation, the scope of which includes both lending-based crowdfunding and investment-based crowdfunding, sought to address the lack of a unified regulatory framework within the internal market, thereby promoting the provision of cross-border crowdfunding services and high level investor protection.
Persons providing crowdfunding services, falling within the scope of the EU Crowdfunding Regulation will be able to provide such services in accordance with national law until 10 November 2022, in order to be furnished with sufficient time to convert national authorisations to authorisations under the new rules.
Legal persons providing crowdfunding services are now expressly excluded from the provisions of the Investment Services and Activities and Regulated Markets Law 2017, as amended.