The European Crowdfunding Service Provider Regulation (ECSPR) (Regulation (EU) 2020/1503) which went into effect on the 10th of November 2021 provides issuers with the possibility to issue tokenized financial instruments with a volume of up to 5 million euros in the EU without the necessity to publish a BaFin approved prospectus or securities information sheet (WIB). This however requires the utilization of a licensed crowdfunding service provider who has to provide a special platform for the offer. The new regulation thereby provides a valid alternative, especially for smaller projects to the traditional issuance that would usually include a security prospectus or a WIB. The possibility to conduct the issuance without a prospectus or any other offering-documentation is not the only potential advantage for issuers which intend to offer their tokens with a crowdfunding service provider.
No Subordination Requirement for Offers Pursuant to the Crowdfunding Service Provider Regulation
In its scope of application, the ECSPR takes precedence over certain other regulations of the financial supervisory law such as e.g. the German Banking Act (KWG). Tokenized debenture bonds are often issued with a qualified subordination clause so that their issuance and the procurement of funds from investors does not qualify as deposit business for the issuer. The qualified subordination of the investors serves to eliminate the unconditionality of the repayment claim of the investors, which is a legal requirement of the deposit business. All this is unnecessary for offers pursuant to the ECSPR. Tokenized financial instruments can therefore be designed in an even more attractive way for investors.
Cross-Border Offers with a Simple Investment Information Sheet Pursuant to ECSPR
The issuer of tokenized investment products offered via a crowdfunding service provider must create an investment information sheet for the offer which is a maximum of six pages long. The information contained in such investment information sheet must be checked for completeness, correctness and clearness by the crowdfunding service provider. There is no need for approval by BaFin. Should the crowdfunding service provider also offer its services in other member states, the investment information sheet must be made available to investors in either the official language of the respective member state or a language accepted by the competent authority of the respective member state. Should these requirements be fulfilled, the offer may take place in more than one member state of the EU.
Attorney Dr. Konrad Uhink