Lithuanian crowdfunding firms well-placed to take advantage of new EU rules

Lithuania’s many crowdfunding platforms are used to regulation: it gives them a ‘significant advantage’ as the EU opens the industry up.

Earlier this month the European Parliament approved a set of new rules aimed at supporting crowdfunding platforms, which will now be able to offer their services across the European Union.

The new regulations aim to improve the global competitiveness of EU crowdfunding platforms, currently lagging behind several other regions in the world, and address some of the difficulties start-ups and other small, innovative companies face when looking to access initial seed funding.

Crowdfunding platforms will no longer have to adapt to divergent regulations currently imposed in different member states, as a single set of rules will cover the whole EU.

While the new rules have been welcomed across the EU, Lithuania’s crowdfunding platforms look to be especially well-placed to take advantage.

“I am sure that the new regulations will offer the Lithuanian fintech market lots of new opportunities,” Deimante Teresiene, head of the finance department at Vilnius University, Lithuania, tells Emerging Europe.

According to Teresiene, the new rules will offer protection to non-professional investors while simultaneously allowing for the more sophisticated management of risk related to losses, as investors must be made aware of all risk factors and given the right to assess these themselves.

Secondly, Teresiene points to the rules which will allow platforms to expand their activity anywhere in the EU.

“Local members of the crowdfunding market will reach more clients abroad, while at the same time, local investors will have more possibilities to invest in other EU countries.”

Viktorija Cijunskyte, founder and CEO of Profitus, a Vilnius-based real estate investment platform, echoes Teresiene’s sentiments.

“This new regulation will help us, the Lithuanian crowdfunding platforms, to enter into a dialogue with the responsible authorities in Lithuania on the conditions applicable to foreign investors,” she tells Emerging Europe.

“We have already had the opportunity to accept investors from abroad, but Lithuanian state taxes made it difficult for us to attract new foreign investors.”

Why Lithuania leads the way

The rise of Lithuania’s fintech sector has been stellar over the past few years. In 2014, there were just 55 fintech companies in Lithuania, but by the end of 2020, there were 230 registered and licensed fintechs.

Of these, 18 are crowdfunding platforms, and the country has had its own law regulating crowdfunding since 2019.

Indeed, Inga Karulaitytė, attorney-at-law at Ecovis Lithuania, specialising in financial services, licensing, compliance, and competition law, says that while the new EU regulations will likely grow Lithuania’s crowdfunding platforms, the country was already doing very well.

“Lithuania is home to a lot of innovative fintech companies. The fintech sector is one of the government’s priorities, and efforts are made to ensure its further development and maturity,” Karulaitytė tells Emerging Europe.

Teresiene meanwhile says that the Bank of Lithuania has “lots of practice in regulation and supervision of the sector”, an assertion further corroborated by Profitus CEO Cijunskyte, who states that, “for those of us who operate in Lithuania and have had extremely strong supervision from the Bank of Lithuania so far, there will be no major changes and many opportunities.”

“We have noticed that crowdfunding is not so well developed in other European markets, so this is a great opportunity for a Lithuanian capital company to provide services abroad,” Cijunskyte adds.

Nonetheless, Cijunskyte does question if a small country like Lithuania will be able to become the crowdfunding hotspot of Europe.

“Probably not,” she says.

“However, Lithuanian crowdfunding platforms will have a significant advantage compared to platforms located in less regulated countries.”

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