Central Bank bosses have vowed to protect consumers and investors by introducing new regulations around crowdfunding.
The fundraising practice, which sees a large number of parties each contributing money to finance a project, has been unregulated in Ireland until now.
But the Central Bank announced new tighter controls in a bid to offer protection and warn about potential risks to stakeholders.
It follows regulations about crowdfunding which were approved by the EU and came into effect last November.
Cash for crowdfunding projects is often drummed up by intermediaries which are known as crowdfunding service providers who act like a broker between investors and project owners.
Under the new rules, these will now be accredited and will be subject to regulatory measures that already exist in the Consumer Protection Code 2012.
For example, advertisements which seeks to raise capital for crowdfunding cannot mislead consumers about investments and must carry warning messages about risks like the entire loss of the outlay.
The bank’s financial regulation director Gerry Cross said: “The Central Bank is now applying its advertising rules to crowdfunding service providers.
“This will ensure that Irish consumers receive the same protections in relation to advertising by crowdfunding service providers that we require of other financial service providers.”
German firm Statista last year estimated that the global crowdfunding market was valued at €10.7billion and is predicted to double over the next five years.
Cross added: “Crowdfunding provides a form of alternative finance for start-ups and SMEs, typically relying on small investments. Trust, confidence, and fair dealing are essential for any financial market or product.”
