By Marius Jurgilas
Crowdfunding platforms in Europe are quietly turning loan books into transferable bonds, and the Savings and Investments Union will be judged on what happens next.
Europe has a single rulebook for its capital markets but has not yet built a single market. The Savings and Investments Union (SIU), formerly the Capital Markets Union, is the latest attempt to close that gap, and the European Commission’s review of the DLT Pilot Regime will decide whether it succeeds. The clearest test will not come from the blue chips. It will come from the long tail.
Harmonised rules, fragmented markets
A retail investor in Lisbon can buy a Frankfurt-listed blue chip in seconds. However, they have almost no practical way to buy an SME bond issued in Tallinn, even though every relevant EU directive technically permits it. Europe’s capital markets are still organised as national markets sitting under a common rulebook, rather than a single market sitting on common infrastructure.
Passporting works for the rulebook, but it does not yet work for the rails on which trades clear and settle, and it does not work for the places where investors actually hold their assets. The SIU is the most recent attempt to close that gap, and the European Commission’s review of the DLT Pilot Regime will determine whether the Union ends up being built on connected infrastructure, or on a thicker layer of harmonisation above the same national silos.
Blue chips built their own workarounds long time ago: dual listings, prime brokerage, cross-border ETFs. The interesting part is happening at the long tail, among the SMEs, mid-caps and platform-funded issuers that most need accessible capital and have the fewest tools to reach it. The most telling shift in that segment, over the past two years, has been a quiet one.
From loans to bonds
Under Europe’s crowdfunding regulation, platforms operate in two main modes: lending-based offerings, where retail investors fund loans to small businesses, and equity-based offerings, where they buy shares. Lending dominates by volume across most of the EU. In the Baltics, and increasingly elsewhere across the EU, platforms have begun structuring those lending offerings as bonds rather than loans. In jurisdictions where retail bond participation is mature, the shift is incremental. In ones where it is newer, it is structural. Either way, the direction of travel is the same.
The loan-to-bond shift sounds technical, but that is not the case. A loan on a crowdfunding platform is, in practice, a hold-to-maturity position; once committed, the investor waits. A bond is a transferable financial instrument. Under MiFID II, that status is what makes an instrument eligible to be admitted to trading on a regulated market or a multilateral trading facility, and to settle through a central securities depository. A loan is not. That single legal distinction unlocks everything that makes a market a market: secondary trading, price discovery, portfolio rebalancing, and the possibility of liquidity beyond the platform that issued the instrument.
It might sound like a cosmetic improvement, yet for SMEs and mid-caps, it is the difference between a closed pool of patient retail capital and an instrument that can attract institutional money once a real secondary market exists.
Internal bulletin boards
Possibility, however, is not the same as practice. Even where platforms now issue bonds, the secondary market is confined to that platform’s own user base. The bond is transferable in law and illiquid in practice. Investors cannot easily move their positions between platforms, let alone across borders. What Europe has at the long tail today is not a capital markets union. It is a patchwork of internal bulletin boards, each operating under the same regulation but on incompatible infrastructure. This is exactly the gap the SIU was launched to address, and the gap the DLT Pilot Regime was designed to close.
The DLT Pilot Regime was built specifically to let market infrastructures experiment with issuance, trading and settlement of tokenised financial instruments under tailored exemptions from MiFID II and the related settlement rules. Those rules, in their current form, make end-to-end cross-border digital trading commercially impractical.
If Europe takes interoperability seriously a bond issued on a platform in one member state could be bought by an investor onboarded through a broker in another, cleared and settled across venues, with consolidated transparency on price and volume. This is how large-cap equity markets already function for blue chips. There is no principled reason it cannot apply to the long tail.
The decision point
Political momentum to address that has arrived. On 21 April, an open letter from 39 trading venues, banks and technology firms, including Nasdaq and Boerse Stuttgart Group, urged the European Commission to fast-track DLT Pilot Regime reforms, raise transaction thresholds and remove licence expiry dates. Industry consensus is in. What is needed is regulatory pace to match it. The recommendation is straightforward: the DLT Pilot Regime should be made permanent, and its caps removed, now, not in another five-year review cycle. Europe is not the only jurisdiction working on this question. The United Kingdom has its own Digital Securities Sandbox, and the United States has been moving on tokenised treasuries and other instruments through both regulated channels and private experiments. If Europe waits another regulatory cycle, the next generation of capital markets infrastructure will be built somewhere else, and the DLT race will already have been lost.
Conclusion
Crowdfunding might not headline the SIU, but it will demonstrate whether the SIU has worked. If a bond issued on a platform in one member state can be traded by an investor in another by the time the next Commission reviews this regime, Europe will have built the integrated capital market the SIU is supposed to deliver. If it cannot, Europe will have produced another rulebook above the same fragmented national markets, and watched the long tail look elsewhere.
Marius Jurgilas
