ESMA Sets Its Sights on AI & Tokenization Across the EU – 2027, You're It 🤖

The European Securities and Markets Authority will make artificial intelligence and tokenization the starting point of a new cross-EU supervisory priority on digital innovation beginning in 2027, the agency said Wednesday. National supervisors across the bloc will map where tokenization is emerging and document how firms use, or plan to use, AI and tokenization in products and processes that directly affect investors.

Under the initiative, authorities will conduct initial checks on a subset of the most affected firms. ESMA described the priority as a way for supervisors to build expertise and develop common approaches as financial-services firms increasingly incorporate AI and tokenized products into their offerings.

The priority has been designated a Union Strategic Supervisory Priority (USSP), the mechanism ESMA uses to coordinate national regulators around risks requiring bloc-wide attention. ESMA's factsheet flags biased or misleading AI outputs, products investors may struggle to understand, and reliance on a limited number of third-party providers as risks to watch.

Every three years, ESMA identifies up to two priorities relevant across the EU that reflect emerging developments and trends. Supervisors also plan to examine what firms tell investors about emerging technologies and share examples of innovations that have improved investor outcomes, reduced bias and produced reliable results.

The new priority will operate alongside an existing USSP on cyber and operational resilience, launched in 2025. ESMA is separately closing a priority on environmental, social and governance disclosures this year, while the authority has also warned that growing crypto ties could amplify risks to traditional finance.