European watchdogs plan AI and tokenization oversight from 2027

ESMA said it would make AI, tokenization and other emerging technologies relevant to finance a supervisory priority from 2027. ESMA and national regulators across the European Union will examine how regulated firms use artificial intelligence and tokenized products in core activities. The regulators will examine uses beyond back-office operations. The program is called "Innovation with investor safeguards." The program will build regulators' ability to supervise new technology. It will also assess whether firms have proper governance. It will assess whether firms use reliable data. It will assess whether firms produce client-aligned outcomes. ESMA said firms are increasingly using AI and tokenized products in day-to-day financial services to gain market share. ESMA said technological innovation brings benefits and risks. The ECB said it plans to invest a small portion of its reserves in tokenized securities.