- In new cryptocurrency rules, ESMA identifies Maximum Extractable Value (MEV) as market abuse.
- A successful regulation depends on input on the proposed standards of ESMA.
The European Securities and Markets Authority (ESMA) has been closely looking at Maximum Extractable Value (MEV) as a clear example of illegal market exploitation as part of its planned technical requirements for the Markets in Crypto-Assets (MiCA) legislation.
This action demonstrates how dedicated the EU is to combating advanced types of market manipulation in the quickly developing cryptocurrency industry.
ESMA: Notable Implications Identified
Leading expert on cryptocurrency laws Patrick Hansen recently brought attention to this development on Twitter and pointed out the important ramifications for the cryptocurrency sector.
MEV is treated as clear example of illegal market abuse by EU draft standards specifying MiCA rules.
ESMA (the EU Securities & Markets Authority) has recently published its third consultation package outlining its proposed technical standards detailing how to implement some of… pic.twitter.com/2CMGKflGw0
— Patrick Hansen (@paddi_hansen) May 27, 2024
Hansen’s observations give a more thorough grasp of the difficulties and adjustments that EU-regulated cryptocurrency companies may encounter.
The ESMA draft, according to a social media post by Patrick Hansen, expressly states that there is market abuse because “the well-known Maximum Extractable Value (MEV), whereby a miner/validator can take advantage of its ability to arbitrarily reorder transactions to front-run a specific transaction(s) and therefore make a profit.”
Hansen underlined that nearly all regulated cryptocurrency companies in the EU, including brokers and exchanges, will be required to use thorough “suspicious transaction or order reports” (STORs) to identify and report cases of MEV.
The six-page ESMA STOR form by itself raises serious questions about how manageable it will be to record each and every MEV incidence.
Feasibility Concerns
The proposed requirements raise serious questions about the feasibility of reporting every single incident since they require comprehensive reporting processes for MEV identification. Hansen questioned if such stringent reporting requirements were really necessary given the intricacy and regularity of MEV events in the cryptocurrency market.
The proposed guidelines from ESMA also propose a cooperative enforcement strategy, calling on authorities both inside and outside the EU to work together to punish market abuse.
As such, parties engaged in MEV may be subject to inquiries and enforcement measures from both EU regulators and other authorities.
As part of ESMA’s continuous efforts to improve MiCA’s execution, the consultation package contains a wide range of technical requirements meant to safeguard investors and improve market integrity.
The emphasis on MEV emphasizes how dedicated the EU is to combating advanced types of market manipulation in the quickly developing cryptocurrency industry. To promote innovation, the EU is getting ready to integrate blockchain and AI and change laws governing AI supercomputers, according to an earlier ETHNews report.
Hansen underlined the need of stakeholder involvement in the consultation process and said that creating efficient and workable regulatory measures need input from people who are actually engaged in MEV and other cryptocurrency operations.
Stakeholders have till June 25 to provide their comments on the draft standards, according to ESMA.