Regulation as a driver for crowdfunding market development: evidence from the Baltic states

ENAs investors’ interest in new investment opportunities grew worldwide, the development of crowdfunding platforms followed suit. To ensure market competition and investor protection, the European Union introduced Regulation (EU) 2020/1503 on European Crowdfunding Service Providers, which entered into force in November 2021, following the transition period. Several years after its implementation, there are clear differences in the development of crowdfunding businesses across the three Baltic countries. Latvia, Lithuania, and Estonia. Using a comparative analysis of market statistics, the article assesses crowdfunding market development in terms of the number of market participants and investment volumes. The findings suggest that the Lithuanian regulator’s proactive supervisory approach and the introduction of dedicated national crowdfunding regulation, implemented before the EU regulation, helped the market develop and increased residents’ interest in crowdfunding investments. The paper contributes to behavioral finance by demonstrating how regulatory approaches can influence investor trust and behavior while maintaining adequate investor protection. Keywords: crowdfunding, investor behavior, regulation, Baltic States.