European financial regulators are preparing to track the use of artificial intelligence and tokenization in customer-facing financial services, with supervisory reviews of the most affected firms set to begin as part of a new program in 2027.
The European Securities and Markets Authority (ESMA) said Wednesday that AI, tokenization and other emerging technologies used in financial markets will become a dedicated supervisory focus from next year.
“Firms are increasingly using AI and tokenized products in day-to-day financial services to gain market share,” ESMA said in a report explaining its decision to initially concentrate on the two technologies. The regulator also warned that technological innovation can deliver benefits while creating new risks.
ESMA and national regulators across the European Union will assess how regulated institutions use AI and tokenized products in their primary business operations. The review will cover applications that directly affect financial services customers rather than focusing solely on internal or back-office functions.
The initiative, called “Innovation with investor safeguards,” is designed to improve regulators’ understanding of emerging technologies while assessing whether firms have appropriate governance frameworks, dependable data and practices that produce outcomes consistent with clients’ interests.
ECB Steps Further Into Tokenization
The European Central Bank (ECB) has also increased its involvement in tokenized financial markets and stablecoins.
The ECB said earlier this week that it plans to invest a limited portion of its reserves in tokenized securities, which would provide the central bank with direct exposure to blockchain-based financial instruments.
The announcement came after the ECB introduced Pontes, a wholesale platform intended to connect distributed ledger technology (DLT) market infrastructure with its existing payment systems. Pontes is separate from the retail digital euro pilot scheduled for 2027.
The ECB and the central banks of all 27 EU member states also called for broader restrictions on crypto platforms offering stablecoin yields, rewards or other returns. They argued that fiat-pegged digital assets should be treated as money rather than savings products.
EU Moves Beyond Crypto-Specific Rules
In 2027, European authorities will identify where financial firms already employ AI and tokenization, as well as where they intend to introduce the technologies into products and processes that directly involve customers.
Supervisors will also conduct initial assessments of selected firms with significant exposure to these technologies and determine where tokenization is already being implemented across financial markets.
The initiative marks a broader regulatory shift following the introduction of the Markets in Crypto-Assets (MiCA) framework on July 1. EU regulators are moving beyond crypto-asset rules to examine how tokenized finance and AI are transforming the wider securities sector.
