From Investment Firm (MiFID) to Crowdfunding Service Provider (CSP)

After using a license as an investment firm (MiFID) for 8 years, Lendahand is now continuing solely under the European policy for crowdfunding service providers (ECSP). Is this something for investors and borrowers to worry about? No, on the contrary. The ECSP license, unlike the MiFID license, is specifically designed for crowdfunding platforms, which means, for example, that we can now also offer automated investing.

In short: Lendahand remains under the supervision of the AFM (Dutch Authority for the Financial Markets) with a specific license for crowdfunding platforms that is much more appropriate and efficient.

Do you want to know more about the different licenses and the journey of Lendahand? In this article, we take you from the moment Lendahand obtained its first license to the license that currently applies to our crowdfunding platform. You will also read about the effects of this on Lendahand and its investors.


How did Lendahand obtain its licenses?

Lendahand was founded in 2012 and started in 2013 with the 1st project on the beta website. This website was open to a smaller audience and still needed much work. A kind of test version. In the spring of 2014, the official version of was launched. At that time, there was no regulatory framework for crowdfunding platforms. Crowdfunding had only been on the rise for a few years, and regulators usually wait to create laws until a new market has reached a certain volume. Often, a threshold of EUR 500 million is used for this. The Dutch crowdfunding market was far from reaching that in 2014. According to, the investment volume that year was EUR 63 million.

In such an initial period, work is done with exemptions, a kind of tolerance structure where there are no licenses, but the regulator is involved and usually sets guidelines. From the start, Lendahand has anticipated that there would eventually be a (European) licensing requirement. That is why we already started discussions with the Authority for the Financial Markets (AFM) in 2015 on preparing for this.

After extensive consultations, it became clear that the MiFID[1] license, a license as an investment firm, would be the most logical for Lendahand. This is a license you can 'passport' to other European countries, and that was exactly what we had in mind at the time. We then entered the application process, and in September 2016, this MiFID license was granted to Lendahand by the AFM.



After extensive consultations, it became clear that the MiFID[1] license, a license as an investment firm, would be the most logical for Lendahand. This is a license that you can 'passport' to other European countries, and that was exactly what we had in mind at the time. We then entered the application process, and in September 2016, this MiFID license was granted to Lendahand by the AFM.

Obtaining this license had many challenges. It meant mandatory cooperation with a payment service provider (to ensure the separation of funds), a comprehensive business description with all processes and procedures had to be created, and – as one of the first platforms – investors (and borrowers) were subjected to a strict Know Your Customer check, something investors were not used to at the time. This led to a stream of questions and many operational challenges. But: we were formally under the supervision of the AFM, and few other crowdfunding platforms could say that.


Crowdfunding in Europe: ECSPR license application

In 2019 and 2020, the crowdfunding investment volume in the Netherlands approached EUR 500 million, and crowdfunding also proved to be a lasting trend in other countries. The threshold for drafting laws around the sector was reached, and the EU took action. They established the ECSPR, the European Crowdfunding Service Provider Regulation. Good news for all platforms and investors, as this created a level playing field. Initially, having the new ECSP license was made mandatory from November 10, 2022, but this was eventually extended by one year to November 10, 2023. 

As the first crowdfunding platform in the Netherlands (and the second in Europe), Lendahand received this new license in August 2022. There is much overlap between the ECSPR and the MiFID license, which allowed Lendahand to smoothly go through the ECSP license application process. The AFM published a news release about this award to Lendahand, click here.

Since then, Lendahand has held two licenses: the MiFID and the ECSP licenses. It quickly became apparent that the ECSP license alone would be sufficient for Lendahand. The MiFID license is relevant for offerings above EUR 5 million per year per borrower, and Lendahand does not intend to enter into such contracts. Additionally, there are a few disadvantages of the MiFID license for Lendahand:

  • Costs (supervision, accountant, KiFID, external compliance officer, etc.)
  • Various reporting obligations
  • The so-called fixed cost requirement cannot be covered by insurance (which forces Lendahand to hold a lot of cash in the bank)
  • Shareholders in Lendahand must undergo an extensive VVGB[2] process at the DNB from a certain percentage.

A complication in relinquishing the MiFID license is that bonds issued to investors (which an investor formally obtains when making an investment) can no longer be administered by Lendahand but must be placed with another/third party. This obligation does not apply to loans. Therefore, Lendahand has chosen not to publish bond projects under the ECSP license anymore but only loan projects, which Lendahand can administer itself. Loans and bonds have many similarities, but all contracts with borrowers had to be formally converted from bonds (notes) to loans. For the investor, this makes little difference; the risk is no different, nor is the interest rate. More on this later.


Request to relinquish MiFID license

After much consultation with the AFM and DNB[3], Lendahand submitted a request to the AFM to revoke the MiFID license at the beginning of 2024. Like obtaining a license, this is not a simple exercise; the regulator wants to ensure that investors are not unilaterally disadvantaged by such a request. This means that a plan had to be submitted detailing the possible consequences of the license revocation and associated mitigating measures. One of the actions in the plan is, of course, informing investors who have made one or more investments on the Lendahand platform in the past (under MiFID) and still have outstanding funds. 


Consequences for investors

From January 1, 2024, Lendahand will only offer (private) loans and no longer bonds.

Loans versus bonds

Although loans and bonds are both financial instruments representing a debt to the borrower, there are several legal differences, namely:

  • A loan agreement is signed by both parties (namely by the borrower and the lender)
  • A loan agreement therefore contains obligations for both the borrower and the lender
  • The contract terms of a loan are more comprehensive than the contract terms of a bond
  • A loan agreement cannot be traded

In practice, this has little impact on the investor. For new investments, this means that the invested amount is a loan to the respective borrower, and this investment is recorded as such in our administration. This process is essentially no different from bonds.

For existing (already issued) bonds, there are two changes: custody and the investor compensation scheme (BCS).


Custody of bonds

Under the MiFID license, Lendahand also had access to the ancillary service 'Custody'. This means that Lendahand was allowed to administer the issued bonds itself in a so-called Wge-depot (Wge stands for Securities Giro Act). The bonds obtained by the investor qualify as Wge-compliant financial instruments that are separated from the assets of Lendahand and are thus protected. These bonds therefore always fall outside a possible bankruptcy of Hands-on BV (which operates under the brand name Lendahand).

Lendahand will, under strict conditions, continue to handle the custody of already issued (and still outstanding) bonds from the past for a certain period, according to the criteria that also apply under the MiFID license. Automated checks take place, there is a monitoring procedure, and twice a year, a report is submitted to the AFM. Additionally, an annual audit is conducted for the agreed period by an external party, which checks whether the custody was orderly in the respective financial year. This report is also shared with the AFM. This way, we can ensure that the administration of the already issued bonds under MiFID can take place in-house, guaranteeing the quality of the administration. This is called a settlement procedure.


Investor Compensation Scheme (BCS)

The investor compensation scheme requires some explanation. It concerns possible compensation for investors in the following two cases:

  • The separation of funds is not adequately applied by the financial institution, and in the event of its own bankruptcy, this financial institution consequently takes investors' funds with it in its fall.
  • The previously mentioned Wge depot is not administratively in order, and in the event of the financial institution's bankruptcy, it is no longer possible to determine which bonds belong to which investor.

It is therefore expressly not compensation that can be claimed for arrears or bankruptcies of borrowers in which investors have invested on the Lendahand platform.

With the acquisition of the ECSP license on August 11, 2022, all projects on the website have been issued under this license and no longer under MiFID (since all projects with borrowers were well below EUR 5 million). Consequently, the scope of the MiFID license has changed. Since August 11, 2022, no more bonds have been issued under the MiFID regime (but under the ECSP regime), and the loans granted since then are not covered by the BCS. Information on the website about BCS was therefore removed from the website at the time of obtaining the ECSP license.

For the bonds that were issued up to and including August 10, 2022, and are still outstanding, after relinquishing the MiFID license, these will still fall under the BCS. 

Lendahand has taken sufficient measures to guarantee both the separation of funds (through our regulated and DNB-supervised payment service provider Intersolve) and the administration of already issued bonds (see above under 'custody of bonds').


Consequences for Lendahand

Although a lot of money has been invested through and (joint venture) over the past 10 years, totaling nearly EUR 200 million, Lendahand is a relatively small company with about 15 employees. The current licenses weigh heavily on the capacity, and it is actually unnecessary to hold multiple licenses. 

Below is an overview of the benefits of relinquishing the license as an investment firm (MiFID):

  • Lower supervision costs (AFM and DNB), lower accounting costs.
  • Less reporting required to AFM and DNB.
  • No mandatory BCS contribution (see above).
  • No longer required to work with an external compliance officer.
  • No longer required to join KiFID (as a uniform complaints procedure has been established from Europe).
  • No relatively heavy VVGB process for (new) shareholders, a procedure that usually takes months.
  • The fixed cost requirement remains the same; however, under ECSP, we can cover this requirement with insurance (we no longer need to keep a large sum of money in a bank account to meet this requirement).
  • Under the ECSP license, we may indeed offer bond projects alongside loans, but we can no longer handle the custody of those bonds ourselves without a MiFID license. Since outsourcing custody is very expensive, we will temporarily refrain from facilitating bond projects on the platform.


In short, we can work much more efficiently from now on, with lower costs and less regulatory pressure. Compared to MiFID, ECSP is much more suitable for Lendahand. And that makes sense. MiFID is a broad license for various financial institutions, while ECSP is specifically tailored to crowdfunding platforms.


Questions following this blog? Contact us at [email protected]  


[1] The abbreviation MiFID stands for "Markets in Financial Instruments Directive". It is a European directive designed to harmonize and improve regulations for investment services within the European Union.

[2] Declaration of No Objection

[3] De Nederlandsche Bank


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