The European Securities and Markets Authority (ESMA) has been closely examining Maximum Extractable Value (MEV) as a form of illegal market abuse within the proposed technical standards for the Markets in Crypto-Assets (MiCA) regulation. This scrutiny by ESMA has significant implications for the crypto industry, as highlighted by commentator Patrick Hansen. ESMA’s draft explicitly mentions MEV as a practice where a miner or validator can manipulate transactions to make a profit, indicating market abuse.
Hansen brought attention to the fact that regulated crypto businesses in the EU would be required to detect and report instances of MEV through suspicious transaction or order reports (STORs). The ESMA STOR template alone spans six pages, illustrating the detailed reporting procedures mandated by the proposed standards. Concerns have been raised regarding the practicality of reporting every single instance of MEV due to its complexity and frequency in the crypto market.
ESMA’s draft standards propose a collaborative enforcement approach, urging authorities within and outside the EU to work together on sanctioning market abuse related to MEV. This means that actors involved in MEV could potentially face investigations and enforcement actions from international authorities in addition to EU regulators. This emphasizes the global effort to combat market manipulation in the crypto sector.
Patrick Hansen underlined the importance of stakeholder participation in the consultation process for refining the implementation of MiCA. Feedback from those directly involved in MEV and other crypto activities is crucial for developing effective regulatory measures. ESMA has set a deadline of June 25 for stakeholders to submit their feedback on the draft standards. The involvement of stakeholders in shaping these regulations is key to ensuring practicality and effectiveness in the regulatory framework.
Once finalized, the standards set by ESMA are expected to significantly influence the regulatory environment for crypto in the EU and may serve as a model for other jurisdictions. The focus on MEV demonstrates the EU’s commitment to combating complex forms of market manipulation within the crypto space. Moving forward, it will be essential for regulators, industry participants, and international authorities to work together to address market abuse and ensure the integrity of the crypto market.
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