• Crowdfunding industry—History, development, policies, and potential issues

      Zhao, Ying; Harris, Phil; Lam, Wing; University of Chester (Wiley, 2019-03-14)
      Crowdfunding has gained a great deal of attention from policy makers, researchers, and practitioners. This paper attempts to provide an overview of the history and development of the industry and discusses different types of crowdfunding and their public policies. It is identified that the operation of peer‐to‐peer lending and equity‐ based crowdfunding is regulated by the Financial Authority; the reward‐based crowdfunding (RBC) and donation‐based crowdfunding (DBC) is yet to be regulated, neither in the United Kingdom or United States. The lack of rules and regulations in the latter two models highlights the burning issues such as potential fraud and mal- practice. Therefore, we suggest that it is timely to consider regulating the two types of crowdfunding possibly by governance mechanism with reporting requirements to keep track of the fund and to provide timely information. Additionally, it is advisable that practitioners to work on an agreed framework to establish industry standard, so potential investors can compare and assess the quality of projects easily. Finally, the management of crowdfunding platforms especially the RBC and DBC platforms should be improved. The ease of launching campaigns has made it difficult for both initiators and investors to succeed in the crowdfunding process. Further research to develop some form of assessment framework would be useful to both parties.