EU's financial regulator to make AI and tokenization a supervisory priority in 2027

The European Securities and Markets Authority said it will elevate artificial intelligence, tokenization and other emerging financial technologies to supervisory priorities beginning in 2027. ESMA told market participants that firms are increasingly deploying AI and tokenized products in day-to-day financial services as a way to expand market share, and that regulators must build capacity to oversee those uses. Under the program, dubbed "Innovation with investor safeguards," ESMA together with national competent authorities across the EU will map where regulated firms already use — or plan to use — AI and tokenization in activities that directly affect clients. The mapping exercise will be followed by initial checks on a selected subset of firms judged to be most affected, with regulators examining governance arrangements, the reliability of data inputs, and customer outcomes. The effort represents a shift in emphasis for EU authorities from implementing crypto-focused rules under Markets in Crypto-Assets (MiCA) to actively scrutinizing how tokenized finance and AI applications are integrated across the broader securities industry. ESMA framed the approach as aimed at capturing both benefits and risks created by technological innovation. The announcement arrives alongside related moves by the European Central Bank and national central banks. The ECB recently said it plans to allocate a small portion of its reserves to tokenized securities and launched Pontes, a wholesale platform linking digital ledger technology market infrastructure to traditional payment systems. Separately, the ECB and the bloc's 27 national central banks urged a broader ban on crypto platforms offering yields, rewards or returns on stablecoins, characterizing fiat-pegged digital assets as money rather than savings vehicles.