A few years ago, the raising of funds looked to have an exciting future. Crowdfunding and peer-to-peer financing were becoming ever more popular; Bitcoin was gaining legitimacy; Blockchain, the technology behind Bitcoin, was attracting serious interest; and generally financial technology (Fintech) was rapidly evolving. That is still true today but the legal and regulatory framework is taking longer to develop. Jersey as an innovative jurisdiction is working hard to meet the challenges.
Crowdfunding and peer-to-peer
Crowdfunding is a method of raising funds for a project or an idea from a large number of people usually via an online platform. Crowdfunding falls into four main types – Donation, Reward, Investment or Loan:
Donation-based crowdfunding is where people give money to a person or organisation to support their activities.
Reward-based (or pre-payment-based) crowdfunding is where people give money in return for a reward, service or product.
Investment-based (or equity-based) crowdfunding permits investment in new or established businesses (typically in illiquid securities such as shares in a company).
Loan-based (or debt-based) crowdfunding, also known as ‘peer-to-peer lending’, where people lend money in return for interest payments and a repayment of capital over time.