Markets
Draft EU standards consider MEV a ‘clear example of market abuse’ under upcoming MiCA rules
The European Securities and Markets Authority (ESMA) has examined Maximum Extractable Value (MEV) as a clear example of illegal market abuse as part of its proposals for technical standards for Cryptoasset markets (Mica).
Patrick Hansen, a prominent crypto regulation commentator, recently highlighted this development on Twitter, highlighting the significant implications for the crypto industry.
MEV monitoring
According to a social media post by Patrick Hansen, a well-known crypto regulation commentator, the ESMA draft explicitly states:
“…the famous maximum extractable value (MEV) by which a miner/validator can take advantage of its ability to arbitrarily reorder transactions to preempt one or more specific transactions and therefore make a profit” clearly suggests the existence of market abuse . .”
Hansen stressed that almost all crypto businesses regulated in the EU, including exchanges and brokers, should detect and report cases of MEV through comprehensive “suspicious transaction or order reports” (STOR), the ESMA STOR model alone extends over six pages.
The proposed standards impose detailed reporting procedures for VPD detection, raising significant concerns about the manageability of each instance’s reporting. Hansen questioned the feasibility of such extensive reporting requirements, given the complexity and frequency of MEV events in the crypto market.
Furthermore, ESMA’s draft standards suggest a collaborative approach to enforcement, urging authorities both within and outside the EU to cooperate to sanction market abuse. This means that actors involved in the MEV could be subject to investigations and enforcement measures not only from European regulators, but also from international authorities.
Consultation deadline
THE consultation kit, part of ESMA’s ongoing efforts to refine the implementation of MiCA, includes a wide range of technical standards aimed at strengthening market integrity and protecting investors. The focus on MEV underlines the EU’s commitment to combatting sophisticated forms of market manipulation in the rapidly evolving crypto sector.
Hansen emphasized the importance of stakeholder participation in the consultation process, noting that feedback from those directly involved in MEV and other crypto activities is crucial for developing effective and practical regulatory measures.
ESMA has set June 25 as the deadline for stakeholders to submit their comments on the draft standards.
Once finalized, these standards are expected to play an essential role in the development of regulatory environment for cryptography in the EU, potentially setting a precedent for other jurisdictions.