The Potential Impact of Crowdfunding Regulation | Prepaid365

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8 January 2014
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Crowdfunding is not a new concept, but it seems that it is really taking off in the UK at present.

Studies in the back end of 2013 by NESTA suggested that the UK crowdfunding network has grown by a whopping 618% in the last year. This is a serious spike in interest by anybody’s standards.

But there are now suggestions that the UK could follow the example set in the USA and limit crowdfunding projects, where only 10% of portfolios could be used for equity crowdfunding.

Finding appropriate regulation for a sector of this sort is always difficult due to the very nature of it, but there is no reason why careful thought and consideration could not develop it further.

Crowdfunding as a concept

One of the earliest examples of crowdfunding saw 125,000 people pledge $100,000 in six months to fund the plinth that the Statue of Liberty now stands upon – that was way back in 1884.

Now crowdfunding is seen as a more viable source than ever to help start-ups, small companies and individuals to find finance for projects of all shapes and sizes. The issue of small businesses struggling to generate sufficient finance is one that has become increasingly prevalent in the current economic climate.

Even as the wider economy improves this year, it is unlikely that this situation will change dramatically.

Those who choose to give money towards such not projects do so because they choose to, as they look at the risks and decide whether it is worth their investment.

Advancements in digital media make the process even easier and generate greater exposure for those looking for money.

The importance of equity funding

Equity funding is a much more modern concept and regulations on the amount that could be invested could limit its impact dramatically.

For the start-ups and small businesses that are only in existence as a result of such funding, a move could potentially limit their future expansion and business plans.

With small and medium sized businesses expected to be at the heart of any attempts to regenerate the economy, limiting their operating capabilities could be a step in the wrong direction.

Crowdfunding can help these businesses to market products, expand, and build stronger relations with other companies, all of which could prove to be important in the long term.

Would be interesting to develop a prepaid card business driven by crowdfunding; food for thought perhaps?

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