Regulation
MEV designated as “illegal” market abuse under EU MiCA
The European Union (EU) under the Crypto Asset Markets (MiCA) has designated Maximum Extractable Value (MEV) as a clear example of an illegal market manipulation strategy.
ESMA disapproves of MEV market abuse
The European Securities and Markets Authority (ESMA) has published its third consultation package, seeking to set out in clear terms how certain statements in the law can be interpreted. This approach is designed to help remove any form of ambiguity in the law whose full implementation is months away.
EU-designated MEV attacks are prevalent in the financial ecosystem, including the crypto ecosystem. The recently published document, according to Patrick Hansen, head of EU strategy and policy at Circle, provided a precise definition of what MEV means.
“The known Maximum Minable Value (MEV) at which a miner/validator can take advantage of his ability to arbitrarily reorder transactions to execute one or more specific transactions and thus make a profit” clearly suggests the existence of an abuse of market,” we read in the report on page 10.
In order to prevent such attacks, ESMA will target trading platforms to report such cases of MEV market abuse. While there are complexities to addressing this issue, regulators are seeking to make the provisions of MiCA as comprehensive as they are clear.
MEV is treated as a clear example of illegal market abuse by the draft EU standards specifying the MiCA rules.
ESMA (the EU Securities and Markets Authority) recently published its third consultation package outlining proposed technical standards detailing how to implement some of… pic.twitter.com/2CMGKflGw0
— Patrick Hansen (@paddi_hansen) May 27, 2024
As part of its in-depth approach, ESMA has also published a 6-page draft to show the template for reporting such suspicious transactions. While not final, this provision may likely undergo further changes in the coming months. The European markets regulator is seeking stakeholder feedback on the proposals with a deadline of June 25 to submit comments.
The EU seeks to reposition businesses
The EU’s fight against MEV market abuse and other related market setbacks comes as one of the avenues the bloc is seeking to reposition itself in the capital market.
According to a previous post on X by Hansen, the European Union is recording negative trends in several key areas. Amid the dwindling share of investor capital, Hansen shared his key concerns. He predicted that the region could fall behind others such as the United States if it does not take appropriate action.
Amid these claims, Bitcoin, through the implementation of MiCA, could help relocate the block as needed.
To know more: Argentina Leverages El Salvador’s Bitcoin Strategy Amid Growing Cryptocurrency Adoption