The European Securities and Markets Authority (ESMA) recently reported that reordering blockchain transactions to maximize profits, known as maximum extractable value (MEV), could constitute a form of market abuse under MiCA. However, some crypto industry experts are calling for nuance to this position.
ESMA's position on MEV under MiCA
In its latest regulatory proposals related to the MiCA law on crypto assets, ESMA expresses its concerns regarding MEV (or Maximum Extractable Value). The regulatory authority classifies as market abuse the strategies by which blockchain operators reorganize user transactions in order to optimize their own profits.
These tactics, like Frontrunning or Sandwich Attacks, can effectively reduce end-user earnings, acting as an “invisible tax.” ESMA underlines that MiCA expands existing EU rules on market abuse to include suspicious activities related not only to transactions, but also to the functioning of blockchain itself.
Although the text of MiCA does not explicitly mention the MEV, ESMA considers that it falls within the scope of this law. Peter Kerstens, advisor to the European Commission, acknowledges that the MEV can raise questions of market integrity and trigger abuses like Frontrunning.
The crypto industry's nuanced position on MEV
In reaction to ESMA's position, several players in the crypto industry are advocating a more nuanced approach. Anja Blaj, policy expert at the European Crypto Initiative (EUCI), argues that we must stop equating MEV with a negative practice. She argues that in reality, only a minority of scenarios constitute real market abuse
She emphasizes that the MEV aims above all to reward validators for their work essential to the functioning of the blockchain. The EUCI warns of potential over-regulation if MiCA were applied too broadly to MEV.
Industry experts are therefore calling on ESMA to clarify precisely which MEV scenarios would constitute market abuse, as well as responsibilities in the event of proven malicious practices.
The public consultation currently being carried out by ESMA should soon make it possible to clarify the official position of the regulator on the complex and divisive subject of the MEV. Sector players have until June 25 to make their voices heard.
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