Europe must reduce fragmentation to unlock economic growth, Eurogroup President Kyriakos @Pierrakakis tells our Supervision Newsletter. The latest edition also covers investment banking, on-site inspection reforms and our clean-up of supervisory measures

3 root causes of "The AI Fragmentation Tax" 1) Visibility is fragmented: About half of companies don't track LLM API costs at all, even when AI is core to the product. 2) Forecasting is broken: Only 15% of companies can predict AI spend within ±10% accuracy, which makes budgeting and margin protection nearly impossible. 3) Infrastructure is sprawling: Agents, MCP servers, LLMs, APIs, and event streams all connect across on-prem, cloud, and hybrid environments. Every touchpoint generates cost that's invisible in isolation but huge in aggregate. Even companies not integrating AI into their product directly are still heavy consumers of third-party LLMs, so they add cost with no measured revenue to offset it. The fragmentation tax compounds the longer it exists. Every release cycle makes it worse if you don't address the 3 root causes. That's why we're obsessed with building a unified cost governance layer for our customers. As AI speeds up the convergence of many capabilities, margin discipline becomes a differentiator.

Instead of patching Layer 2 fragmentation with theoretical economic zones, true scalability requires a fundamentally unified architecture. Yellow bypasses this dilemma entirely by delivering a chain-agnostic settlement layer powered by state channels for seamless, unfragmented liquidity.

There’s a very simple way to screw up RWA tokenization It’s stablecoin fragmentation from the rollup-centric roadmap and EVM sprawl, but turbocharged. Let’s not do this again. Crypto UX is already hard enough for end users. This is the future awaiting us in the next year

Higher rates, the AI buildout and geopolitical fragmentation are reinforcing the new economic regime we’ve long described. So how are we positioned in this environment? Watch my colleague Natalie Gill explain in this week’s #MarketTake#:

Geopolitical alignment can significantly impact global economic growth, and rising fragmentation in the past decade has cut close to 1% cumulatively from global GDP. Read more from Goldman Sachs Research:

It was a pleasure to co-host the conference on “Fiscal and Monetary Policies in Developing Economies for Navigating Fragmentation Risks” with Asian Development Bank (ADB) in Singapore. AMRO Deputy Director Rahman Abdurohman delivered the opening remarks, followed by a keynote speech by AMRO Chief Economist Dong He and a joint keynote address by distinguished professors Joshua Aizenman, Jamel Saadaoui, and Hiro Ito. The conference featured 12 research paper presentations and lively exchanges on fiscal and monetary policies amid rising global fragmentation while safeguarding macroeconomic stability and fostering resilient growth. Our sincere thanks to all participants for the insightful discussions.