The European Securities and Markets Authority (ESMA) has investigated the Maximum Extractable Value (MEV) as a clear example of illegal market abuse under the proposed Technical Standards for the Regulation of Markets in Crypto Assets (MiCA).
Patrick Hansen, a leading commentator on crypto regulation, recently highlighted this development on Twitter, noting the significant implications for the crypto industry.
MEV monitoring
According to a social media post by Patrick Hansen, a well-known commentator on crypto regulations, the ESMA draft explicitly states:
“…the well-known Maximum Extractable Value (MEV) at which a miner/validator can take advantage of its ability to randomly reorder transactions to prepare a specific transaction(s) and thereby make a profit” clearly indicates its existence. of market abuse.”
Hansen emphasized that almost all regulated crypto companies in the EU, including exchanges and brokers, should detect and report cases of MEV through comprehensive ‘suspicious transaction or order reports’ (STORs), with the ESMA STOR template alone spanning six pages.
The proposed standards require detailed reporting procedures for MEV detection, raising major concerns about the manageability of reporting each individual case. Hansen questioned the feasibility of such extensive reporting requirements given the complexity and frequency of MEV occurrences in the crypto market.
Furthermore, ESMA’s draft standards suggest a joined-up approach to enforcement, encouraging authorities both inside and outside the EU to work together in sanctioning market abuse. This means that actors involved in MEV could face investigations and enforcement actions not only from EU regulators, but also from international authorities.
Deadline for consultation
The consultation package, part of ESMA’s ongoing efforts to refine its implementation of MiCA, includes a wide range of technical standards aimed at increasing market integrity and protecting investors. The focus on MEV underlines the EU’s commitment to tackling advanced 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 to developing effective and practical regulatory measures.
ESMA has set a deadline of June 25 for stakeholders to submit their feedback on the draft standards.
Once finalized, these standards are expected to play a crucial role in shaping the regulatory environment for crypto in the EU, and potentially set a precedent for other jurisdictions.