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FinTechs belonging to this category operate crowdfunding, crowdinvesting and crowdlending platforms on which money is raised to invest in various projects, mainly start-up companies and real estate projects.
Crowdfunding is not a legal term, but often used as the general term for donation-based crowdfunding (the investor donates the money to the project), reward-based crowdfunding (the investor receives an often symbolic consideration for his investment), equity-based crowdfunding (crowdinvesting: the investor participates in the profits of the financed project or acquires shares or debt instruments) or lending-based crowdfunding (crowdlending: the investor is reimbursed at the end of the project with or without interest).
Introduction
Attitude of the country towards crowdfunding, crowdinvesting and crowdlending platforms
Donation-based crowdfunding is widely accepted in the Canadian market. Reward-based and equity-based crowdfunding are not as widely accepted in Canada. The securities commissions in Canada would consider equity-based crowdfunding as the issuance of a security and as such would be subject to all of the regulations and required licenses of any other investment dealer. This makes such crowdfunding difficult to pursue in the Canadian market place. However, as stated above the donation-based crowdfunding is widely used in Canada.
Legal affairs
Obligations and requirements to provide crowdfunding, crowdinvesting and crowdlending platforms described above
As stated above, in the case of equity-based crowdfunding all of the requirements for any securities dealer have to be met. The result is that such crowdfunding in Canada is very limited. The donation-based crowdfunding platforms are common in Canada and are not subject to the regulations and licenses required for an equity-based crowdfunding platform.
Additional comments regarding the legal situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area
Equity-based crowdfunding is a very small market in Canada due to the many barriers to entry. As stated above the donation-based crowdfunding platforms are well used in Canada. It should be noted that very recently the Government froze the crowdfunding proceeds of a political protest movement. The courts also froze some proceeds in respect of a class action proceeding against the organizers.
Economic conditions
Market size for crowdfunding, crowdinvesting and crowdlending platforms and biggest companies in this business area
As mentioned above there is very little activity in the equity- or lending-based crowdfunding market in Canada.
Additional comments regarding the economic situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area
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