Melker Bengtsson
TL;DR
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In 2027, ESMA will make AI and tokenization a supervisory priority that national regulators in EU member states must work on.
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Authorities will identify where tokenization is happening, map how companies use AI and tokenization, and run checks on the most affected.
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Cyber and operational resilience checks will be extended to smaller financial firms and crypto firms.
In 2027, the European Securities and Markets Authority (ESMA) will make AI and tokenization a supervisory priority. ESMA, the EU’s financial markets regulator, picks up one or two of these supervisory priorities, called Union Strategic Supervisory Priorities (USSPs), every three years. National regulators in EU member states must then work on these USSPs.
Yesterday's announcement from ESMA said:
The digital innovation USSP aims to ensure supervisors have the expertise and capacity to oversee the use of new technologies.
Companies regulated by the respective national authorities are increasingly using tokenized assets and AI in financial services, according to ESMA. That’s why it has chosen this focus for 2027.
What Authorities Are Tasked With in 2027
Under the USSP, authorities are tasked with a few things in 2027: to identify where tokenization is happening, to map out how companies use or plan to use AI and tokenization in ways that directly affect their clients, and, lastly, to run checks on a subset of the most affected ones.
ESMA directly points out a few risks with the development of these technologies within the financial sector: biased or misleading AI outputs, hard-to-understand products, dependence on a limited number of third-party providers and supervisors lacking skills.
Checks Extended to Smaller Financial and Crypto Firms
In addition to next year’s USSP, ESMA expects the 2025 USSP to run alongside it, which covers cyber and operational resilience. Those checks will now be extended to smaller financial firms and crypto firms. ESMA points to AI as one reason for pushing this:
Going forward, we will continue our efforts and coordination to address the challenges ahead, including those emerging from advanced models such as frontier AI.
While a USSP doesn't create new obligations for firms, it does direct where national authorities spend their time. For firms involved in crypto or tokenized assets this probably means a lot more bureaucracy and paperwork over the next year.
