ESMA Targets Tokenization and AI with Regulatory Overhaul

The European Securities and Markets Authority (ESMA) has announced plans to regulate tokenization and artificial intelligence (AI) starting from 2027. This move aims to ensure that issuers of tokens comply with EU securities laws, which would bring them under regulatory oversight for the first time.

Tokenization involves creating digital representations of assets such as securities, real estate, or commodities on a blockchain. ESMA wants to ensure that tokenized assets are transparent and compliant with existing regulations, preventing potential market manipulation and protecting investors.

The move also targets AI, which is increasingly being used in the financial sector for applications like portfolio management and risk assessment. However, regulators are concerned about the lack of transparency and accountability in AI-driven decision-making processes.