Financial-return crowdfunding and regulatory approaches in the shadow banking, FinTech and collaborative finance era

The relationship between financial innovators and regulators has been historically tense, with financial innovators taking advantage of loopholes and regulators desperately trying to keep pace with innovations while dealing with limited resources and long bureaucratic processes. Nonetheless, in recent years, FinTechs – un-regulated start-ups applying technology to finance – have exponentially accelerated such race, making innovative regulatory approaches and new perspectives necessary. The present paper discusses relevant issues pertaining to the regulation of FinTech, using financial-return crowdfunding (FR-crowdfunding) as case study and model, deriving from its FinTech, shadow banking and collaborative economy natures, important indications for regulators. Current trends in regulating FR-crowdfunding in Member States are also analysed, together with related shortcomings and benefits, with the view to proposing a more harmonised regime for the sector, tailored to its risks and features and advancing Capital Markets Union objectives.