Value Nomad

September 28, 2020

European Crowdfunding Network Alert on Kuetzal

The European Crowdfunding Network(ECN) has reported Kuetzal to the National Conduct Authority in Estonia. ECN took the step after concerned investors complained about poor investor relations, and other issues, from the crowdfunding platform.

Until its troubles, Kuetzal has been a vibrant crowdfunding platform specializing in business and real-estate projects. Loans typically attract a 15% pa interest making it a lucrative platform. Additionally, most of the loans had a buyback guarantee.

kuetzal alert

A management change in 2019 has seen deterioration in responses and conduct with investors from the platform. According to ECN, the network has reached out to the P2P lending company but has not received satisfactory information to clarify the situation.

P2P Lending Industry Oversight

P2P lending oversight falls under the relevant National Conduct Authority in each jurisdiction. As such, crowdfunding regulation is only applicable at the national level, with each EU member state implementing its set of regulations.

The ECN, while proactive in maintaining standards and best practices, cannot exercise oversight over its members. That mandate falls on individual authorities in each country. Consequently, cross-border enforcement isn’t always possible.

A disjointed regulatory environment is detrimental to the growth of the peer-to-peer lending industry. Consequently, ECN, in conjunction with the European Commission, the European Parliament and the Council has agreed to harmonize regulation in the long term.

EU authorities move would provide a stronger framework for growth the industry, and better protect investors. It would also join other efforts around the globe, such as in South East Asia, aimed at regulating the nascent industry, spurring growth, while protecting investors.

Kuetzal – The Way Forward

For now, Kuetzal investors can only hope that the current management addresses their concerns. An announcement from the company indicates that it plans to discontinue operations and supposedly reimburse invested capital.

Furthermore, the National Conduct Authority in Estonia, in this case, the Department of Financial Markets at the Ministry of Finance can step in and provide direction.

Investors should, therefore, direct their concerns to the finance ministry and demand action.

In conclusion, therefore, crowdfunding is still a young industry. Some of the necessary structures and regulation is not in place. As such, investors should exercise caution and perform thorough due diligence before investing. Examine the platform’s history, current operations, past performance, management, etc. Don’t base your decision on promised returns alone.

For now, we can only hope that the situation at Kuetzal is temporary and that a positive solution will emerge soon.

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