Key facts
- ESMA will prioritize AI and tokenization for digital innovation supervision from 2027.
- National regulators will map firm uses of AI and tokenization affecting investors.
- Checks will be conducted on a subset of firms most impacted by these technologies.
- Risks identified include biased AI outputs and complex investor products.
- The initiative is a Union Strategic Supervisory Priority (USSP).
The European Securities and Markets Authority (ESMA) has announced that artificial intelligence (AI) and tokenization will be the primary focus of its new supervisory priority for digital innovation, beginning in 2027. This initiative aims to equip supervisors across the European Union with the necessary expertise and establish consistent oversight methods as firms increasingly integrate these technologies into financial services.
National regulators within the EU will be tasked with identifying areas where tokenization is gaining traction and documenting how financial firms are currently using or planning to use AI and tokenized products in ways that directly impact investors. As part of this process, a selection of the most affected firms will undergo initial checks. ESMA highlighted potential risks such as biased or misleading AI-generated information, the complexity of new products for investors, and the potential over-reliance on a small number of third-party technology providers.
This new priority operates as a Union Strategic Supervisory Priority (USSP), a framework ESMA employs to align national regulators' efforts on risks that require a bloc-wide approach. ESMA selects up to two such priorities every three years, focusing on emerging trends and developments. In addition to assessing risks, supervisors will also review how firms communicate about these technologies to investors and share examples of innovations that have successfully improved investor outcomes, reduced bias, and ensured reliable results. This new focus will run concurrently with an existing USSP on cyber and operational resilience, which commenced in 2025, while a previous priority on ESG disclosures is concluding this year.