LONDON Feb 28 Britain's loan-based
"crowdfunding" platforms and some of their customers could be
breaking the law by acting like banks and "accepting deposits",
the Financial Conduct Authority (FCA) said on Tuesday.
Crowdfunding or peer-to-peer (P2P) refers to people lending
small amounts of money to a platform, which then lends the money
to businesses or individuals.
But if the platform is used by a financing business to
obtain cash to lend on, this would be "accepting deposits", the
legal term for defining banking activity, the FCA said.
Banks face much tougher regulation than crowdfunders, such
as strict capital requirements, to protect customers.
The crowdfunding platforms, and financing businesses that
use the platforms, could be in breach of FCA rules and
potentially face sanctions.
"We expect that you should establish whether you have been
facilitating loans via your platform to lending businesses who
have lent that money to others who do not have the required
accepting deposits permission," the FCA said in a "Dear CEO"
letter sent to heads of crowdfunding companies on Tuesday.
It was signed by the watchdog's director of supervision for
retail firms, Jonathan Davidson.
The crowdfunding chiefs must respond to the FCA and say
whether they have been breaking the rules and, if so, what they
will do about it.
In the past, Dear CEO letters have been a last chance for a
sector to make changes to avoid enforcement action.
(Reporting by Huw Jones; Editing by Susan Fenton)