ESMA Prioritizes AI and Tokenization Oversight in EU Financial Markets

The European Securities and Markets Authority (ESMA) is planning to prioritize oversight of artificial intelligence (AI) and tokenization in the EU financial market starting from 2027. The move aims to bring these technologies under a single supervisory spotlight, with ESMA launching a new Union Strategic Supervisory Priority dedicated to digital innovation.

The initiative will require national regulators across the EU to map how financial firms use AI and tokenization in client-facing operations, inspect a subset of those firms, and build shared frameworks for oversight. The focus on tokenization is driven by its growing adoption in the EU, with tokenized equities increasing from approximately €0.3 billion to an estimated €1.9 billion over just 18 months as of the first half of 2026.

The ESMA's concern isn't just about size, but also liquidity fragmentation, where tokenized assets trade in thin, disconnected pools rather than deep unified markets. This can warp price discovery and make it harder to execute trades at fair value, problems that compound as more traditional finance infrastructure connects with tokenized systems.

The ESMA will coordinate with National Competent Authorities (NCAs) to develop common supervisory approaches for AI-driven client tools and tokenized securities offerings. The NCAs will map out which supervised firms are deploying these technologies in ways that touch clients directly, select a subset of those firms for deeper examination, and build shared frameworks for oversight.