AIFC develops regulations for loan- and investment-based crowdfunding platforms

NUR-SULTAN – The Astana Financial Services Authority (AFSA), the financial regulator of the Astana International Financial Centre (AIFC), introduced the first regulatory framework for loan- and investment-based crowdfunding platforms, reported the AIFC press service.

“This new framework is one of AFSA’s ongoing commitments to promote innovation in the financial sector consistent with the latest industry developments and best practices of leading financial centres, while safeguarding investor protection and market integrity,” the press service said. 

The centre developed a flexible and risk-oriented regulatory framework to protect crowdfunding investors and clients. It includes two market activities for operating a loan-based or equity-based crowdfunding platform and establishing prudential and conduct standards for platform operators including requirements on anti-money laundering and counter-terrorist financing, fundraising limits, appropriate systems and controls, risk disclosure, conflict of interest and due diligence of firms using crowdfunding services.

“The small and medium-sized enterprises (SMEs) have proved to be important contributors to national prosperity, economic growth and employment and crowdfunding can become a viable vehicle for bolstering financing options for SMEs and start-ups. By creating this framework, AIFC marks another step towards building a vibrant entrepreneurial ecosystem in the region,” said AFSA Chief FinTech Officer Assylbek Davletov.

The project was developed with the support of European Bank for Reconstruction and Development (EBRD). 

“EBRD has been committed to the AIFC since its inception. The distinctive feature of FinTech companies engaged in crowdfunding is that they employ digital platforms to directly connect those looking for financing with potential investors.  Of course, this also entails a number of risks and concerns for investors and the purpose of the new crowdfunding rules is to provide appropriate safeguards concerning investor protections. We hope this will enable crowdfunding to become an important source of non-bank financing in support of job creation, economic growth and competitiveness,” said EBRD chief counsel Jelena Madir, the project’s operational leader.

Crowdfunding is an innovative opportunity for SMEs and start-ups to obtain capital through small loans and equity investments from large numbers of investors through an internet-based platform. It represents an increasingly important alternative to non-bank funding sources and will play an important role in the economic growth of Kazakhstan and the wider region. 

Earlier, AIFC and EBRD signed a memorandum for further cooperation to develop a supportive regulatory framework for the Kazakh green finance system and acceleration programme for issuing green bonds on the Astana International Exchange (AIX). The parties agreed to conduct joint activities regarding the green bond market, policy papers and recommendations for green finance regulation. 

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