The European Union’s securities regulator plans to make artificial intelligence and tokenization a supervisory priority starting in 2027, signaling a broader regulatory focus on how emerging technologies are being used across financial services.

The European Securities and Markets Authority (ESMA) said it will work with national regulators to examine how regulated financial firms use AI and tokenized products in core activities, including products and processes that directly affect customers. The initiative, called “Innovation with investor safeguards,” will focus on strengthening regulators’ ability to oversee new technologies while assessing firms’ governance, data reliability and customer outcomes, CoinDesk reported Thursday (Sept. 24).

European regulators plan to map where financial firms already use, or intend to use, AI and tokenization. They will also conduct initial checks on a subset of firms most affected by the technologies and identify where tokenization is emerging in financial markets, CoinDesk reported.

The effort comes as European regulators broaden their attention beyond establishing rules for crypto assets. The EU’s Markets in Crypto-Assets, or MiCA, framework took effect in 2024, while ESMA’s new initiative will examine how technologies such as AI and tokenization are being incorporated into the wider securities industry.

ESMA said firms are increasingly using AI and tokenized products in day-to-day financial services. The regulator also noted that technological innovation can bring both benefits and risks.

The supervisory push builds on concerns ESMA has previously raised about AI in investment services. In May 2024, ESMA warned that AI could introduce risks including algorithmic bias, data-quality problems, opaque decision-making and excessive reliance on technology by firms or clients.

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