ESMA to prioritize EU-wide AI and tokenization supervision in 2027

The European Securities and Markets Authority (ESMA) will make AI and tokenization the initial focus of a new supervisory priority on digital innovation starting in 2027.

Across the European Union, supervisors will identify where tokenization is emerging and document how firms use or plan to use AI and tokenization in products and processes that directly affect investors. They will also conduct initial checks on a subset of the most affected firms.

ESMA said Wednesday that the priority is intended to help supervisors build expertise and develop common approaches as firms increasingly use AI and tokenized products in financial services.

The initiative is a Union Strategic Supervisory Priority (USSP), which ESMA uses to coordinate national regulators’ work on risks requiring attention across the bloc. Its factsheet identifies 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 that are relevant across the EU and 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, reduce bias and ensure reliable results.

The new priority will run alongside an existing USSP on cyber and operational resilience, launched in 2025. ESMA is closing a separate priority on environmental, social and governance disclosures this year.

Related: ESMA warns growing crypto ties could amplify risks to traditional finance