Funding Innovation in the Era of Weak Financial Intermediation: Crowdfunding and ICOs for SMEs in the Context of the Capital Markets Union

Abstract

This chapter concludes the first part of the book, expanding the scope of financing for SMEs by moving from the traditional financial intermediation to a brand new model, the financial disintermediation. There is a significance of peer-to-peer lending, crowdfunding and the Initial Coin Offerings (ICOs), explaining why they consist of a dynamic set of financial instruments. These instruments can mobilize idle capital in cutting edge new technologies, usually considered as “un-bankable” due to their high risk and the uncertainty of their free cash flows. Investing in emerging technologies like blockchain, AI, machine learning, IoT and biotechnology will guarantee the leading role of the EU in the new global competitive environment of the Fourth Industrial Revolution. Eva and Dimitrios propose a set of characteristics that is necessary for the EU to adopt in order to create an innovation-friendly regulatory framework that will boost both equity- and lending-based crowdfunding as well as a policy approach that will allow ICOs to become a distinct asset class, able to be blended with traditional financial instruments. This chapter reflects the regulatory approach adopted by Eva, who was the European Parliament’s rapporteur and co-rapporteur of regulations and resolutions related to blockchain and crowdfunding, as well as that of Dimitrios, who was the draftsperson of those regulatory texts.